Going, going, gone?

It's now a buyer's market and nowhere more so than in the property auction rooms, where savvy investors are snapping up bargains at up to 30 per cent below estate agent prices. In the past, buyers inspired by TV shows such as Homes under the Hammer were happy to bid to levels similar to those properties being sold through estate agents. But according to auction information company, Essential Information Group (EIG), around 48 per cent of lots are not selling, leading to a significant fall in prices.

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Buying at auction

Buying at auction is becoming increasingly popular. The Royal Institution of Chartered Surveyors (RICS) says nearly 5,000 homes were sold at auction in the third quarter of 2007 - a 5 per cent increase on the same period in 2006. Many buyers are attracted to auction houses because of the transparency of sales. As soon as the hammer - or 'gavel' - goes down at auction, contracts have been exchange and both parties are committed.

The auction house also appeals to buyers who want to remove the anxiety of a chain falling through, being gazumped buy a higher offer or left homeless if the seller changes their mind about selling. Once your bid has been accepted, you must pay a deposit of around 10% on the day and usually have 28 days to complete the transaction.

Repossessed homes are not the only properties you will find in the auction room. Executors, local authorities, housing associations and property companies all choose to sell their properties at auction. Indeed, anyone who wants to sell their home swiftly, without the set back of a chain, will opt to sell at auction.

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Doing your homework

But while buying at auction is a relatively straightforward business, it isn't without its pitfalls and novices would do well to do their homework first. Your first step should be to register your interest with the auctioneers by requesting a catalogue. These will include a list of properties up for sale, along with details and guide prices for each property - or 'lot'.

If you find a property you like, make the effort to go and see it. While a brochure will indicate whether a property needs updating or upgrading it will not highlight a nearby mobile phone mast or factory plant. Auction catalogues will typically publish times for viewings, when you can check out a property at a pre-arranged times close to the auction date.

04 July 2008 © Moneyextra.com

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