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Auctions are a great place to find a bargain, particularly if you're a house hunter. And because they speed up the buying process - you have to complete within 28 days - there's no chance of being gazumped.For these reasons, interest is growing among first-time buyers and buy- to-let investors. The Royal Institution of Chartered Surveyors says auctions account for 5 per cent of all property transactions in the UK - a figure that is rising all the time.
But auctions are also fraught with potential pitfalls. Many vendors like the quick sale but this is often because the property auctions has structural problems they hope the buyer won't spot. And bidders can get swept away by the excitement of it all and pay over the odds.However, you don't have to be a millionaire property developer to buy successfully at auction. Do your research and you will minimize the chance of things going wrong.
The main problem is the extremely tight deadline: once the hammer comes down, you are committed to the deal. You must pay a 10 per cent deposit on the day of the auction, and the other 90 per cent within 28 days. Fail to pay on time and you will forfeit your deposit and lose the home. You are also responsible for buildings insurance on freehold properties from when you exchange contracts.
To speed up the process, ensure your finances are organized before you bid. Paul Stock-well, associate at mortgage broker Savills Private Finance, specializes in arranging auction finance quickly. Buyers pay 1 per cent of the sale price for the service.