Gamble of homes with £1 price tag?
In the last year the number of properties going to auction has rocketed by more than 40%. But, according to some estate agents, only a handful are repossessions. The driving force seems to be to get a good price in a cut-throat market. Recently a home in Gateshead with a £1 starting price fetched £66,000. So is putting a home on the market for less than it is worth a gamble or a slick marketing ploy?
"I'm a northerner and I don't like to be ripped off". This was Peter Milne's attitude when it came to selling a two-up, two-down terraced house in Carlisle left to him by a cousin he had never met.
Other properties on Colville Street, Denton Holme, Carlisle, had sold for £95,000.
But number 49, where his cousin Joan Milne had lived until she died of a heart attack in 2011, had no central heating and needed a complete refurbishment.
Busy former chef Mr Milne wanted a quick sale.
He did not want the house to languish on the market for months and approached Auction House Cumbria for advice.
He said: "I wanted rid of it basically and thought it would fetch about £40,000 as it was very run down.
"The profits needed to be divided among 11 relatives, so we were never talking about large sums."
The auction house advised Mr Milne to give it a guide price of £35,000. It went in the catalogue as Lot 1 and was described as "spacious" but in need of a complete modernisation.
More that 20 people expressed an interest or had a viewing and when it went under the hammer last week it fetched £52,500.
Mr Milne, 62, said: "I may have got more if I'd gone the conventional route, but wanted a quick sale and from me approaching the auctioneers to it being sold was just two months - I'm totally happy with the way it was handled.
"I don't know who bought it as I wasn't at the auction."
He had to pay £690 upfront and around £2,000 to the auction house after the sale completes in 28 days.
Newcastle-based Caroline Pattinson, of Keith Pattinson, which runs auctions, said sellers who went down the auction route were mainly developers but more private residents were joining the market.
She said setting a low starting or reserve price was a way of "drawing attention to a lot". Her firm recently sold a two-bedroom terrace in Gateshead with a starting price of £1 for £66,000.
Setting a reserve also offers a safety net for vendors as they do not have to sell if it is not reached.
The gamble of setting a very low reserve means they are obliged to sell the property at this price if this is the only bid they get.
But Ms Pattinson said sellers took the risk because they knew this was unlikely.
She said: "The image that those who sell at auction are desperate and have fallen behind on their mortgage is a myth.
"Usually they want a quick sale for whatever reason and contracts can be exchanged on the same day.
"It may be that a private sale has fallen through and they are wanting to emigrate. At least they know at auction there will be high levels of viewings."
'Transparent and exciting'
Auctioneer Richard Francis, of Rook Matthew Sayer in Prudhoe, Northumberland, helps run a monthly auction.
Last year the firm sold 800 homes for a total of £73m with the average price of a property going for £91,000.
This month there are 135 lots - one of the more unusual is St Andrew's Church in Sunderland, a Gothic-style church with a starting price of just under £300,000, which is being marketed as potential flats.
Mr Francis said: "Out of 135 lots only four or five are being forced to sell.
"Before auctions there is a period of intense publicity to market a property to the maximum, and get as many genuine buyers through the door as possible."
Guy Charrison, president of industry body, National Association of Valuers and Auctioneers (NAVA), said: "People like the transparency, excitement and certainty of an auction."