The owners of a derelict inner west house that hasn’t been lived in for more than a decade pocketed $700,000 more than they were hoping for when it sold at auction on Saturday.

The large Federation home on 1322 square metres, on the edge of the bustling Burwood shopping strip, was snapped up by a “local family” for $3.2 million in front of a large crowd on the site.

It was one of 840 properties scheduled to go under the hammer on Saturday – the city’s largest September auction day on record.

By Saturday evening Domain Group had collected 639 results and put the clearance rate at 72.4 per cent, down on last weekend’s 75.2 per cent.

“The Sydney auction market is heading south,” said Domain Group senior economist Dr Andrew Wilson.

“The balance of power is clearly shifting towards a buyers’ market.”

The crumbling Burwood house has been owned in a company name, WP Holdings, since 2004 when it was purchased for $1.4 million. Records show the director of the company lives in the suburb, and it is understood no one has lived in the house in the time they have owned it.

More recently the house has been boarded up and covered in graffiti, and the once grand gardens are now rubble. Most of the hundreds of people who have trodden over the site in the past several weeks of the campaign were barred from going inside but selling agent Greg Emerton, from Devine Real Estate, had taken a handful of hopeful buyers on a tour of the house with “hard hats and torches”.

In the days leading up to the auction he was unsure how many people would actually want to buy the house, given that it was in a conservation zone and the council had given no undertaking that it could be knocked down or redeveloped.

“There’s been lot of interest but many buyers have put it in the too-hard basket,” he told Domain on Friday. “They feel they’re flying blind not knowing what changes they can make to the property.”

Nevertheless six groups signed up to bid at the auction and four were active bidders.

The buyer, who would only identify himself as a member of a local family, said he was unsure what he would do with the property but that renovating the house was “definitely” part of the plan.

“I like the look of the house. And it’s on 1300 square metres in a good position in the heart of Burwood. I thought it was worth $2500 to $3000 a square metre,” he said.

Mr Emerton said for buyers the location on Burwood Road “a hop, skip and a jump” from the shopping strip proved more important than the uncertainty of what could be done with it.

“Where else can you get a big block so close to Burwood. You can’t. There aren’t any left.”

The demand for houses in the inner west was still very strong, despite a fall off in demand for apartments over the past few weeks, Mr Emerton said, which he believed was due to stricter lending rules for investors.

This sale follows the auction last week of a mansion in Burwood for $6.5 million, which fetched a record price in the suburb. That house on Woodside Avenue had passed in on a vendor bid of $9 million at auction in 2014.