PAUL HOLMES has the best piece of advice on auctions. “Don’t bid,” confides the operations director of Firstrung.co.uk. “Putting up your paddle is, in some ways, the dumbest thing you can do at an auction.” It’s not that Holmes advises against seeking bargains in the sale room – he thinks more struggling buyers should recognise the chance to buy cheaply and “build in some sweat equity”. But, emboldened by press coverage and TV shows such as Homes Under the Hammer, auction amateurs are beginning to dominate UK sales – and some are overpaying in the belief that anything sold at auction is a bargain.

Owner-occupiers, or wannabe developers, are helping to make auctions big business. The Royal Institution of Chartered Surveyors says that the number of lots has tripled in a decade to 25,112 a year; the amount raised increasing eightfold to £5.2 billion. The Essential Information Group, which tracks auction results, says that 3,371 lots went under the hammer in June, up 34.9 per cent on the past year alone.

Amateur buyers are rushing in just as the professionals – developers, builders and buy-to-let investors – are struggling to make the sums add up. For Marcus Jays, a former estate agent turned property trader, this means he can often resell run-down properties without needing to do them up, such are the prices being paid. And he says: “More often than not, when I am outbid these days it is by an owner-occupier.”

The risk is that such buyers may get carried away and forget that auctions are often the easiest method of disposal for properties with legal or structural problems. A recent survey for Standard Life Bank found that 98 per cent of buyers thought they would save money by buying at auction – but less than half would pay for a survey. Yet buyers who fail to do their research risk being unable to secure a mortgage.

Melanie Bien, of Savills Private Finance, says: “No lender will give you a mortgage for more than the property is worth. If you don’t have the cash available to complete within 28 days, you will lose the 10 per cent deposit.”

Even experienced buyers can run into trouble on their first foray to the saleroom. Laura Sawyer and Kathleen Crane have bought and sold several London flats and are confident redevelopers. But when they spotted a 17th-century stone and cob cottage in Devon after two years of searching, they found themselves overpaying. Sawyer says: “We didn’t pay more than we wanted, but in hindsight we could have paid less if we had not been so green. When the bidding started, the adrenalin rush was unreal.”

Holmes, of Firstrung, advocates making an offer before the sale – or afterwards, on an unsold property, on which an owner might be willing to negotiate. “Think of the auction as the centrepiece of a West End show,” he says. “You have the rehearsal and the after-show party, which are the presales and postsales, where the best opportunities might be.”

Buyers should also note that opportunities vary across the regions as sentiment shifts. Bidders in London and the South East can expect stiff competition, but increasing numbers of auction properties fail to sell in the North and Midlands. A small investor might object to a low sales price and hang on to the property, but institutions such as banks have fewer qualms. Holmes says that low sales rates are an opportunity. “If sound fundamentals begin to appear, then priced-out first-time buyers may be in the ideal situation finally to reap the rewards.” www.eigroup.co.uk

For a full guide to buying property at auction visit: timesonline.co.uk/property

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