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Researching this piece, we realised that there are several misconceptions about property auctions. One of the key flawed perceptions is that only foreclosed homes or properties which are in a serious state of disrepair find themselves on sale at auctions. This isn't true - people sell their houses through auctions for a variety of reasons, such as needing to move very quickly and therefore needing an expedited sale, which can only be achieved by selling at auction. Another common perception is that only professional investors and seasoned veterans buy properties at auction. The truth is that people from all walks of life buy houses at auction. With this in mind, we decided to set out the core advantages and disadvantages of property auctions, in the hope that we can demystify the process.

Advantages

The main benefits of the auctions are:

Speed

Buying a property through traditional means can be, and usually is, a lengthy process, involving chains, the risk of being gazumped and all manner of legal headaches during the conveyancing process. The contrast with auctions couldn't be more stark. With auction purchases, when you submit the successful bid, you will immediately pay a 10 per cent deposit and you will then be required to pay the balance within 20 - 30 days.

Certainty

This is essentially the result of the process being so quick. When buying a house through an estate agent, there are all manner of potential stumbling blocks and, until you have exchanged contracts with the vendor, there is the very real possibility that the deal might fall through. Once you have paid your deposit on sale day at an auction, you can be certain that the house, subject to you paying the balance, is yours.

Choice

One of the principal bonuses of buying at auction is the sheer volume of properties that are available for sale. When the listings appear, typically about three weeks before the sale date, you will find all types of homes being offered for sale. This increases the chances of your finding the exact type of property you want. Put simply, you will have access to far more houses and flats than if you stick to estate agents.

Cost

Not every property offered at auction will be sold at below market value, but you are much more likely to find a bargain when you buy a house this way. This is largely because the vendors selling their property at auction often tend to be highly motivated and anxious to sell, even if this means failing to realise the property's full value. With house prices in the UK being so elevated right now, this can be a huge boon for prospective homeowners.

Level playing field

A consistent criticism of the house buying process, at least in England and Wales, is that it is somewhat murky, with all sorts of obstacles. For example, you might have an offer for your ideal home accepted, only to learn that another party has put in a higher bid and either gazumped you or prompted the owner to ask you to raise your offer. You won't know who the new bidder is and it's possible you won't even know the size of their bid. At auctions, you see who is making a bid and know precisely how much he or she has offered. You can make a decision on whether to raise your bid fully armed with all the facts.

Simplicity

Buying a house at auction could not be simpler. You make a successful bid, give evidence of your identity and address, provide details of your solicitor and pay your deposit. This is in sharp contrast with the epic saga involved when you buy a house via more traditional means.

Convenience

Once you have registered, you don't even need to get up from your armchair to bid at an auction. You can phone in your bid, use an agent or "proxy", and even bid online. If you are busy or unable to attend a scheduled sale, you don't have to miss out on the opportunity to buy a property that has caught your eye.

Disadvantages

Rush

You only have a matter of days to engage a surveyor to inspect properties in which you are interested. As tempting as it might be, you should never cut corners on this exercise, because a professional survey can make the difference between you snapping up a real gem and buying a highly expensive white elephant. You also need to find a solicitor who can examine the property's legal pack and do the relevant searches, to ensure that there are no legal issues with your prospective purchase.

Finances

You need to have funding in place before you make a bid and, if you are depending on bank financing, you need to be sure that they will lend you money secured on the type of property you envisage buying. Some mortgage lenders, for example, won't consider lending you a significant sum for a flat over a restaurant. This means that you need to do a great deal of upfront research, before you start bidding at the property auctions.

There is also the danger of getting carried away with the bidding and committing to more than you can reasonably afford. It's critically important that you have an upper limit and stick to it rigidly. For this reason, buying properties at auctions may not be entirely advisable for some people.

No investment is guaranteed

If you are buying to let or to sell, you need to be aware that new taxes around investment properties might erode your profits. Similarly, house prices in the UK and the private rental markets are subject to volatility like any other sector, so you shouldn't rely on making a certain yield. If you absolutely depend on income from an investment, you need to talk to a financial adviser who can tell you whether property is the most suitable market for you.

Visit Nethouseprices again soon for the latest property market news and for in-depth commentary and analysis of the housing issues affecting you and your family.