House buying can be a frustrating and sometimes fruitless enterprise. An estimated 30 per cent of house sales never proceed to completion. However, there is an alternative to buying a house the conventional way buy at auction.
Figures from the Royal Institute of Chartered Surveyors (RICS) suggest that house auctions are increasing in popularity. The number of properties sold at auction reached 25,115 in 2006 compared with only 7,892 a decade earlier. Fans of the BBC's Homes Under the Hammer will know the routine well. Go to the auction, put your hand up again and again until you finally get the property you want. Well, not quite.
Buying a house at auction does not take as long as buying the conventional way, but still requires an investment of time. "You have to be sensible," says Christopher Coleman-Smith, an auctioneer at Savills. "You need to do your homework, check out the property and have your finances in place."
That means your mortgage has to be agreed in advance and you need to bring a deposit with you to the auction, which is usually about 10 per cent of the selling price. And of course it's always advisable to have a survey done.
The auction catalogue and legal packs for each property also provide useful information, including the guide price and terms and conditions of buying and selling at auction. By the way, the guide price is only a guide and not the actual selling price, which could be lower or higher.
The speed it takes to buy a property at auction is a huge advantage. There's no chance of any breaks in the "chain" and you could be living in your house within a month of bidding for it. However, the speed also means that you don't have weeks of contemplation to think through your decision. "Once the hammer is down, you have entered a legally binding contract," says Christopher, "you are expected to honour that contract. If you don't, you could get sued and face legal problems."
As to whether you can get bargains at auction, the answer is perhaps. As with any product, the value of a property is determined by what people are prepared to pay for it. If a property is an absolute must have, then you could end up paying over the odds simply because you have been competing against another determined bidder. However, according to the RICS, auction properties tend to be cheaper than properties bought through estate agents.
Auctions are also an option if you're looking for a car. "Where else could you find low mileage, nearly-new cars, prestige cars, company cars at two or three years old, high mileage, older well-used cars and even light commercials being sold on the same day at one location?" says Tim Naylor of British Car Auctions, a company that handles about 1.3 million car deals per year.
Cars are sold at auction by private individuals, car dealerships or government departments. Sellers complete a legally binding form which declares the vehicle's age, mileage and condition. "Usually a reserve value is set, which is the lowest figure the seller will accept. Auctioneers cannot sell below this value," says Tim.
The rules of the game for buying a car at auction are much the same as buying a house. Never forget that once the item has been sold you have entered a legally binding contract and you have to pay the purchase price, and also in most cases a buyer's fee.
According to Tim, the buyer's fee guarantees that you have good title to the car, which means there is no outstanding hire purchase or credit on the vehicle, or it being a stolen vehicle or even an undeclared insurance write off. "Should such events subsequently come to light, you are protected by the buyer's fee," says Tim. Auctioneers have different terms and conditions, so you need to read those carefully before you start to bid.
Unlike buying a house at auction, you have some time after the auction to check the car out and make sure that it is as described. For example, if it is sold with no mechanical faults then that is what you are legally entitled to expect, otherwise the auction company could be in breach of contract and you could have legal redress
TOP TIPS FOR BUYING AT AUCTION
* Visit auctions to become familiar with the process.
* Have all your finances in place before the auction.
* Obtain an auction catalogue.
* Check the car or house out in advance of the auction.
* Read each auctioneer's legal terms and conditions before you bid.
* Stick to your price limit.
www.bca-europe.com (British Car Auctions)
(Manheim car auctions)
(Royal Institute of Chartered Surveyors)