“Forget anything about guide or reserve prices, its all meaningless”
I spent an afternoon at an auction in central London last week and the title of my blog above, said by the auctioneer, was a highlight (or should that be lowlight?) of the day. Perhaps he was trying to forewarn me how my day would turn out…..
The property market marches on but very little seems to change in the auction. You see, I haven’t actually set foot in an auction room for the best part of two and a half years. The auction attendees today were the usual suspects; the hard-nosed dealers, the just-came-to-see-what-its-all-about-ers and the excited amateurs and their friends in support who could not wait to bid.
Like most of you, I have read, slack-jawed, the online auction catalogue bargains, the houses in Wales or County Durham or other far flung (for me) places with guide prices of £10 or £20,000. I have even viewed some auction properties that were in markets local to me. More than that, I have downloaded numerous legal packs, completed my due diligence and then……nothing.
I gave up attending auctions, dear reader, and I can still remember the reason why. There was a single, crystalised moment that, for me, made auctions rather a waste of time.
I was at an auction room in Essex. The property in question was a two-bedroom, freehold property. It had a rather unrealistic guide price and the two open house viewings I attended were very busy. Unperturbed, I downloaded the legal pack and got my solicitor to run his eye over it. The paperwork all checked out and so, on a dreary Tuesday afternoon I sat off to attend the auction. I arrived well in time as I always like to check out the competition; look for any dealers I recognize and maybe ask the legal pack desk how many times the legal pack has been requested as this can give an indication of possible demand on the day.
Lets skip to the good bit (thanks Rizzle Kicks). “My” lot eventually comes up. It came clear that I was bidding against several people until it was just yours truly and a lady with a young child in a pushchair. I kid you not her hand had stayed up the whole time! The auctioneer even had to remind this lady not to bid against herself. That was the day, to borrow another pop lyric, the music died.
Since then I have bid by telephone on a handful of lots. The trouble is, I am a cynic. Having started my property career working with an auction house in East London, I always felt bidding in person is favourable. I like to get a feel for the room and I am sure it does not happen but when phone bidding I always imagine its just me, the price is being driven up and I will end up overpaying. Like I said, I know this doesn’t (or couldn’t) happen but it puts me off my flow. As you can imagine, I would never proxy bid. Telephone bidding is stressful enough!
So back to the present day….I was hoping to pick up a property in the Medway region. The house in question had a very low reserve of £80,000 but would need around £30,000 spending on its refurbishment. The lot was the last one of the day and my optimistic feeling soon waned as many people had remained seated.
The auctioneer called for bids. In my head it worked like this: I bid £90,000 and everyone sighed and left. In reality it worked like this, I bid £90,000 and immediately someone else bid £95,000. I bid £100,000, the top of my limit and crossed my fingers. I left with the bidding sailing past £120,000. After checking later, I found that the property actually sold for £150,000, almost double its guide price. I feel the property would be worth between £165,000 and £175,000 in very good condition and obviously I wish the new owner the very best of luck with their purchase.
Here are some tips to make your auction visit as successful as possible:
1. Do the legwork. This is obvious but check the local market, speak to local agents and check out the sold prices on the relevant web sites.
2. Check the legal pack. This is especially important on leasehold property. It may cost a few hundred pound for your solicitor to check over the paperwork but could save you tens of thousands of pounds in the future. One thing to be especially mindful of is property with short leases.
3. Have a builder look at it. If the property does need work, make sure a professional checks it over. You may be OK at DIY but a proper tradesmen may spot something you don’t.
4. Try and attend as many viewings as possible. You will then be able to see how many other people are interested.
5. This is the biggie. Set a maximum bid limit and DO NOT exceed it. Seriously, like the lady in my story above, it is really easy to get carried away and then realise you have spent £20,000 too much.
In fairness to auction houses in general, many people buy property at auction every month and are happy with their purchases. Auctions don’t seem to work for my strategy but they may work for you.
If you are looking at any auction property in the Docklands, East London or South East London areas, feel free to contact me for free, impartial advice.
And yes, there were several houses in the North today that sold for under £30,000 and seemed to produce well over 10% rental yields. Maybe there is something in that?.....
Have you had any luck at auctions? Do you need some further advice. Please email me by clicking HERE