The auction of one of Bermuda's most notorious homes ground to a halt yesterday afternoon after bids failed to reach the reserve price.

Auctioneer Andrew Horsfield, of Horsfield Property Services, stopped proceedings after the bids for 21 Tee Street — former home of convicted fraudster Terrence Smith — stalled at $2.2m.

He told the 12 registered bidders and other onlookers at the plush Devonshire mansion — reportedly worth $2.5 million — that he was not authorised to sell the property for that price.

"We haven't reached the reserve," he said. "If people are interested in purchasing the property you can negotiate after the auction.

"I'm going to have to withdraw the property from the auction process today." The three-bedroom, five-bathroom house, which boasts a swimming pool, six-seat cinema and stunning sea view, was renovated by Smith with money he swindled from Bermuda Housing Corporation (BHC) in a $1.2 million fraud. The former BHC property officer was jailed for eight years for the scam earlier this year.

David Durham, of Building Blocks Construction and Yhoshi Productions, was the highest bidder. He said he and two partners hoped to purchase the house to re-sell for about $2.7 million and that he would be negotiating with Mr. Horsfield this week.

"I definitely won't be living there — it's not my style," he joked. "I think it's a nice property but there are some issues. I think the driveway needs some attention."

The reserve price for the house — which was not disclosed yesterday — was set by Chief Justice Richard Ground after court proceedings which found that Smith's mortgage provider Capital G had first claim on money raised from its sale. Capital G's lawyer Justin Williams was at yesterday's auction.

He told The Royal Gazette that the bank would recoup the full amount of the mortgage debt — thought to be about $1.2 million — once the property was sold.

He said it was still to be decided whether the Crown would receive the rest under the Proceeds of Crime Act.

He added: "We would like to see the property sell for its highest market value ultimately. If that means we have to wait beyond the date of the auction to achieve that we are perfectly satisfied. We are particularly satisfied that the process that has been approved by the Chief Justice has been followed through."

Mr. Horsfield said more than 100 people had viewed the property prior to the auction. "The next step is that the house is still for sale," he said. "We are inviting people that attended the auction, the bidders, to submit further offers verbally or in writing. "Once their offer is accepted it would move to a contract. We have had several offers at this process. We want to keep the momentum moving and I would anticipate by the end of the week having a sale. We believe that it's going to be sold and that it will be sold before Christmas."

21 Tee Street house fails to sell at auction