With the housing market slowing, and homes taking longer to shift, auctions are back on the block, offering vendors a quick sell, and buyers the chance to bag a bargain.
Typically, the properties that end up under the hammer are repossessions, run-down houses and those owned by local councils or housing associations.
According to the latest figures from the Royal Institution of Chartered Surveyors (Rics), there were 4,794 homes sold at auction in the third quarter of 2007 – a rise of 5 per cent on the same period a year before.
And now, with repossess- ions expected to shoot up by 50 per cent in Britain this year, Rics says the auction rooms are going to be busier than ever.
"Lenders often use them to achieve a quick sale of repossessed properties, while those who can't keep up with their mortgage payments, and who want to sell before they are repossessed, may find an auction enables them to do this within a tight time frame," says Melanie Bien from mortgage broker Savills Private Finance.
David Smith of estate agent Dreweatt Neate adds that this is the "purest form of selling a property".
"It all happens on the day," he explains. "Vendors like the greater certainty and the quick turnaround – and they can get a higher-than-anticipated price if there is competitive bidding."
So who are the buyers frequenting the bidding rooms? "Auctions are full of property developers and experienced landlords looking for opportunities, but it is not uncommon to see first-time buyers looking for a bargain," says Ms Bien.
"The number of first- timers attending auctions has increased dramatically as house prices have risen, leaving them struggling to buy on the open market."
Many parents, she adds, also buy at auction on behalf of their children.
Mr Smith says many of the repossessed properties coming to auction at the moment are just the sort that would suit a first-time buyer. "If you're brave, and have done your research on how to bid, this could be a good opportunity to get your first home at perhaps a 10 per cent reduction off the market price."
The short timescale can also benefit the buyer, says Ms Bien. "Once the hammer comes down, you are either the new owner or you're not.
"There is no chance of being gazumped by a later, higher offer; you exchange contracts on the day and this is binding."
When your bid has been accepted, you put down a deposit – usually 10 per cent – on the day itself, along with a small auctioneer's fee, and then have 28 days to pay the balance.
"It usually takes 10 to 12 weeks to buy a property in England and Wales, so this speeds up the process dramatically," says Ms Bien.
While this may sound appealing, buying at auctions must be approached with caution. "They still tend to be the hunting ground for experienced buy-to-let investors," says Andrew Montlake at broker Cobalt Capital. "While a property developer knows the full potential – and right value – for a property, a first-time buyer could end up paying over the odds."
"Do your homework," says Allison Crawford from Standard Life Bank. "Get a copy of the auction catalogue and understand the market you are buying in. Attend a few auctions as an observer, just to get a feel for them."
Jenny Challenor at independent financial adviser Torquil Clark points out that as far as arranging a mortgage is concerned, buying at auction is the same as the traditional purchase route. "This means that if the survey shows signs of problems, or the valuation is below the bidding price you pay, then the lender may refuse to lend you all or any of the funds. So it is important to get all the usual property and land searches carried out, and seek legal advice before placing a bid."
But this can be an expensive waste of money if your bid fails.
Most auctioneers organise open days when you can view a property together with other potential buyers. "If a lot of work is required, it may be worth taking a builder along with you to give an idea of how much it is likely to cost," says Ms Bien.
There is also the danger of spending more than you can afford, so decide on a maximum amount you are prepared to pay – and stick to it. "Never get caught up in the emotion of the auction, and never bid above your pre-set price," says Ms Crawford.
It is important to arrange your finance ahead of the auction. "The credit crunch means lenders are tightening their belts, making it harder to arrange a mortgage than it was," says Ms Challenor. "Make sure you have secured a 'mortgage in principle' before you buy, as failure to complete within 28 days will usually mean you lose both the sale and your deposit."Reuse content