Monday, 22 April 2013

Property auctions

I've attended two property auctions, one in September 2004 and one in June 2011. I haven't been to any other type of auction, but you can easily see antique and collectables auctions on daytime TV, and I've done that. I'd say that a property auction is much the same as those, except that (obviously) the bidders see only a list or a brochure describing each lot, nothing is on view or held up to see, and much more money is normally involved. You would never make a frivolous or incautious bid at a property auction, because of the dire consequences of accidentally securing a house or a plot of land that you do not have the money for.

You always go to a property auction with at least some preparation done.

In the case of a town auction, of town properties, you will surely have registered with the auctioneer - it may be compulsory - and you will have studied the brochure. If you are a landlord (as is very likely with town properties) you will know pretty well what income you might expect to make from the property if you buy it, and therefore what you can afford to spend on its purchase and refurbishment so that the return will be worthwhile.

In the case of out-of-town properties, farmers' fields perhaps, you will have driven out to inspect whatever you are interested in.

In any event, you must have your solicitor's contact details, and your cheque book. An immediate part-payment is required at the conclusion of bidding, when the sale becomes binding. Exchange of contracts is deemed to have taken place at the fall of the hammer. And that's the advantage of selling by auction - if there are bids that at least reach the reserve price, the property will be off your hands at once, with only a month to complete the legal aspects in full, and of course to get the rest of the money in. If it sells. One of the lots at the June 2011 auction I went to was the Cottage I owned at Piddinghoe. There were no bids. But thankfully there was post-auction interest, and a deal was done through the auctioneeers. Sometimes that's how it goes.

In my last post, M--- and I had in September 2004 been taken with a field at Melplash, north of Bridport. This is what my contemporary auction notes said about it:

We attended our first property auction on 24 September 2004 at The Brownsword Hall in Poundbury, Dorchester, from 2pm. We heard about it by picking up a pamphlet at the Bridport offices of Symonds & Sampson on the previous day. We had time to view some of [the lots]:

# an agricultural contractors' depot at Melplash, not far north of Bridport (Lot 1, 0.45 acres, guide price £20,000). It would need a lot of clearing up - old oil tanks, rusty machinery, and so on.

# two fields near Melplash. One (Lot 6) was on the main road (14.31 acres, guide price £40,000). The other (Lot 5) was set back down a lane (2.39 acres, guide price £10,000). We were very taken with the smaller field, which was level and very spacious, with something of a view of the higher surrounding countryside, really rather attractive; and for an evening we wondered how we might buy it - neither of us had brought a cheque book. By next morning, we had decided that we ought not to try. We would just go to the auction for the experience.

# three fields near Askerswell, east of Bridport (Lots 2, 3 and 4; 15.22, 3.26 and 14.99 acres; guide prices £50,000, £15,000 and £40,000).

We were mainly interested in buying a plot of land on which to park the caravan when visiting the area, and eventually erecting something more permanent. [We] went to the West Dorset Council Offices in Bridport first thing on the day of the auction, spoke to the Planning Officer (who was luckily available) and discovered that planning permission would be needed just to site the caravan in the field, and there was no way permission would be granted to build anything. This seemed to rule out using the land for anything other than pasture (its current use). We would have to acquire a property with a house on it already, in the conventional way. 

A photo of the auction hall on our arrival. It became absolutely packed with heaving humanity.

[The auction] was due to begin at 2pm sharp. We got there at 1.20pm, when there were just a handful of people present, all of them sitting down. But after 1.30pm the hall began to fill up rapidly. Soon all the seats were taken, and it was standing room only for most. By 1.50pm there was not enough room at the back for everyone to get into the hall. So the people in seats were asked to move their chairs forward, and bunch up a bit. This seemed reasonable, although probably not strictly in accordance with fire regulations! The hall became absolutely packed. One of the solicitors present - there were staff from two or three firms - actually took some photos of how well-attended the auction was: there must have been unusual interest in the lots.

It was clear that the best place to be - if you wanted to see everything, no matter what the crowding - was along a side wall, about one-third of the way from the front, seated if lucky (but that wouldn't matter if intent on bidding). 

The auctioneer explained that successful bidders would be presumed to have read the General and Special Conditions of Sale, and understood the Rules of Auction, but he made particular mention of these points:
• bids should be obvious ('bold') - he would not be able to see nods or winks at the back of the hall.
• no Buyers Premium would be charged - what you bid was the price you paid.
• the successful bidder would immediately be asked to complete a form giving basic details about themselves, and who their solicitors were - two ladies were on hand to help get this done - and he or she would have to write a cheque (no cash, because of the money-laundering regulations) for 10% of the purchase price.
• exchange of contracts would be deemed to have taken place at the auction, at the conclusion of bidding.

The auctioneer always began the bidding with the guide price. Usually he got no bid, and would suggest a lower price, often half, then got the bidding under way in steps of £1K, £2K or £5K. It was most often £2K. Bidding proceded briskly. The only lot that took a longish time to reach a final price was the Martinstown barn (Lot 9) - two bidders were overbidding each other in £2K or even £1K steps, all the way up to an eventual £251K. 

This is the result [of the bidding]:

Lot                           Guide price        Sold for
1    Depot                £20K                   £41K
2    Field                  £50K                   £67K
3    Field                  £15K                   £15K
4    Field                  £40K                   £40K
5    Field                  £10K                   £26K
6    Field                  £40K                   £58K
7    Field                  £15K                   £15K
8    Field                  £20K                   £20K
9    Barn                  £100K                 £251K
10  Barn                  £120K                 £163K
11  House               £160K                 £170K
12  Tel exchange   £25K                   £85K

All but four of the lots were sold for more than the guide price. Four went for more than twice the guide price. That seemed to demonstrate that an awful lot of people were keen to buy land, and that some would pay way over the guide price for rather unsuitable properties.

The surprises were:

• The high price paid for Lot 9 (West End Barn at Martinstown - we had a look at it afterwards: it was in good condition, certainly had potential, and was unlisted; but as it was still in an 'agricultural' state, you’d need to spend a lot more to convert it into a home.

The Martinstown barn. You can see why people would bid for it. But when M--- and I passed by in September 2009 - on one of our last caravan holidays together - the barn was still in its 'agricultural' state. Somebody made a big mistake buying it.

• Ditto, the telephone exchange at Beaminster. (A small, squat building: what would you actually use it for?)

'Our' field (Lot 5) realised £26K, which was in line with our best expectations. We were sorry to see it slip away, but it would have been unwise to buy it without proper prior research, and we certainly wouldn't have paid so much [on the off-chance] we could have got planning permission. 

'Our' field in September 2004. Nothing but grass.

Hello, hello! Three years later, and there's a gravel drive, new fencing, fast-growing shrubs, and a posh new stone building complete with the kind of logs you chop up for wood-burning stoves. Seems rather more substantial and well-appointed than the usual horse shed! Easily convertable into a holiday home, we thought. Just waiting for the right moment? My contemporary notes on that:

But in fact we missed an opportunity. We revisited the field on 20 September 2007, and found that:
• The old entrance gate had gone.
• A gravel drive had been laid out, with fencing separating what seemed to be a 'garden' and the paddock beyond. Various plants were growing.
• A substantial barn-like 'stable' had been erected in brick and flint, somewhat concealed behind the roadside hedge. It looked as if it could easily be converted or extended to make a proper house... Just as we thought someone might do. They would make a killing. 

[The auction] was all over within an hour. As soon as the final lot went, everyone started to leave. We went back to the car feeling that it had been a most interesting experience, and probably not the first.

Footnote on 10 November 2008
The property market slumped from October 2007. Almost certainly there would not be the same level of interest in most of these lots now, unless the prospective buyers were lucky enough to have plenty of spare cash and were prepared to take a long-term view. In late 2008 there was no sign of the property market picking up anytime soon. We ourselves had lost a fair bit on Ouse Cottage, bought just before the slump. If only one had a crystal ball.

And of course little has changed since November 2008 - the UK property market is still in the doldrums. Here and there, people who bought at a good price, and sold at the right moment, may have made some money. Here and there, a speculative purchase of land may have become the setting for a dream self-build, as planning regulations relax a bit. But I rather think that the people at that 2004 auction who bought pony pastures in the hope of using them for something else have mostly been disappointed.

No comments:

Post a Comment

This blog is public, and I expect comments from many sources and points of view. They will be welcome if sincere, well-expressed and add something worthwhile to the post. If not, they face removal.

Ideally I want to hear from bloggers, who, like myself, are knowable as real people and can be contacted. Anyone whose identity is questionable or impossible to verify may have their comments removed. Commercially-inspired comments will certainly be deleted - I do not allow free advertising.

Whoever you are, if you wish to make a private comment, rather than a public one, then do consider emailing me - see my Blogger Profile for the address.

Lucy Melford