Property: It's a bargain - isn't it?

In the first of a four-part series, Richard Phillips takes you through the ins and outs of bargain-hunting in the property market, whether your motive is profit or necessity

Bargains in the housing market come in different shapes and sizes, and what may be a steal to one person, can be beyond someone else's wildest dream.

Likewise, the reasons for hunting out a bargain can also stem from different motives. There are bands of small- and not-so-small-scale property developers who make a living from finding properties that they can buy on the cheap, renovate, and then sell on for a tidy profit.

Whatever the motive, the knack is in learning how to spot a real bargain. Many properties can seem cheap at first sight, in comparison to other similar properties, but there is very often a good reason.

It helps if you have some entrepreneurial flair, and are genuinely thrilled at the prospect of finding something cheap. If the exercise is no more than a chore, the chances are you won't have the persistence or perspicacity to succeed.

Bargain hunters broadly fall into two categories: those who are in it for the money, and those who are in it because their budget does not stretch that far. Even so, a good bargain, by definition, should provide a handy return on your initial investment.

For those who are financially stretched, one of the most important issues to come to terms with is not to set your sights too high. If you want a one-bedroom flat, but can't afford it, plump for a studio. Even tiny, box spaces have a market; and if you find a small, delapidated studio, and do it up well, you can still make a small profit, enough perhaps to enable you to progress onto the next rung of the property ladder.

So, how to go about finding bargains? One of the most common sources over the last decade has been the flood of repossessed properties, which building societies and banks have had to remove from their books. Flats which may have been bought for pounds 60,000 in 1988, at the height of the property boom, could have been snapped up for as little as pounds 25,000 by 1990 and 1991. Now, of course, they have recovered nearly all their value; bargains, indeed, for those who bought them at their nadir.

This source, however, is rapidly drying up, as the tide of mortgage defaulters recedes. But repossessions still happen.

The most recent figures from the Council of Mortgage Lenders show repossessions for the second half of 1996 have fallen to their lowest level since the first half of 1990. For the second half of last year, there were 18,460 repossessions by building societies and banks, down from around 24,000 in the first half of last year. But that still equates to a total of 42,000 repossessions last year: the equivalent of the housing stock of one small town.

Estate agents are unanimous that repossessions are a less sure-fire route to quick profits, than in the early Nineties. But they should be a first choice of anyone willing to put in the legwork.

And how do you come across repossessions? The Halifax Building Society re-markets many of its repossessions through its own chain of estate agents. It also puts them out to residential property auctioneers.

Which brings us onto the subject of buying at auction.

As anyone who has bought at auction knows, whether for cars, junk, or fine arts, it can be a thrilling experience. It can also be a spectacularly unsuccessful means of obtaining something on the cheap. A bidding war means you can end up paying over the odds for a property.

For those thinking of going down the auction route - and there are many happy purchasers, who have benefited from this approach - you must be aware that it is entirely different from buying through an estate agent.

For a start, if your bid is accepted, it becomes a binding contract, the moment the auctioneer's hammer descends.

There are many other pitfalls to consider. Professional dealers often buy blind, but as a first-time buyer, you must always see the property.

Generally speaking, it is less risky to buy a freehold property at auction. Leasehold properties require detailed study of the lease, possibly with your solicitor's advice, before considering whether to bid.

And where the leasehold is a repossession, you need to be absolutely sure that you will not be liable for any unpaid ground rents, or service charges.

Aspray's Auctioneers, based in east London, produce a very helpful one- page guide for first-time buyers thinking of buying at auction. (tel: 0171-702 8311).

If you stick to buying through an estate agent, there are still a number of ploys you can use. It is well known that property is a seasonal market. But less people are aware that some properties sell better at one time of the year than another. Tom Trudgian, managing director of Stern Studios, a London estate agency, explains that a snug, 1930s purpose-built flat with porterage, and communal central heating, seems far more appealing when it is being marketed in the depths of winter.

By contrast, a sunny converted flat with high ceilings, big windows, and a balcony, and lacking a bath, will turn off the buyers in the depths of winter. The trick is to try and find such properties at the wrong time of year, so to speak. Mr Trudgian says it is a well-established phenomenon, and he always advises clients to sell their properties at a time of the year which shows them to their best advantage. The bargain-hunter simply does the opposite, and looks for properties being sold at the worst time of the year.

Another ploy, especially now, with the market rising, is to ask estate agents to keep you posted of offers which have fallen through. By the time this has happened, the seller will be utterly fed up, and may be under some pressure to sell. Another offer which comes in hard on the heels of the first offer, can often result in an agreed sale in record time. After an event like this, many vendors re-market the property at the same price - even though, especially in central London where prices are rising at a rapid clip, it may have already increased in value.

Next week: council properties, derelict properties, and conversions.