The number of repossessions is soaring. In the first half of 2008, almost 19,000 properties were repossessed – up by nearly 50 per cent in a year, according to figures from the Council of Mortgages Lenders. It's a dreadful situation for those who have lost their home. But macabre though it may seem, if you are on the hunt for a reasonably priced property, snapping up one of the repossessed properties now flooding into auction rooms around the country, could mean cutting the cost of your new home by as much as 50 per cent. And though no one really wants to gain from someone else's problems, those savings are difficult to ignore.

The percentage of repossessions up for auction has soared by almost 300 per cent over the past three years, with numbers reaching 3,102 in the first half of 2008 from 800 in the first half of 2005. Property auction specialists the Essential Information Group has found that "distressed sale" properties as they are more palatably known, now represent more than 20 per cent of all properties going under the hammer nationwide – even more in the South-east, home counties and the North-east where more people are unable to keep up repayments.

And the latest survey from the Royal Institute of Chartered Surveyors (RICS) shows the success rate for properties sold at auction has fallen to its lowest level in three years as people get knocked back by the blunt force trauma of the credit crunch. But that also means that with less competition the chances of bagging a bargain are even better.

"Banks and lenders offering repossessed properties are often keen to secure a sale on the day and are less worried about achieving a high price," says David Sandeman, the managing director of the property auction specialists the E.I. Group. "As a result these properties are selling extremely well compared to other lots, with investors bagging some excellent deals. New build flats are also selling at huge discounts."

"Evidence suggests that snapping up a property at auction could save you as much as a half the value of the property," agrees Louise Cuming, head of mortgages at price comparison site moneysupermarket.com. "But you really have to do your homework before you step foot into the auction room. Everything has to be in place and bolted down when you go to the auction because once you raise your hand or scratch your nose, you are committed to buying that property."

"There is more to do with an auction property because they usually need some care and attention. But the timescales involved in a property auction are much tighter than going through an estate agent," warns Cuming. "There is very little time between the property being advertised and the auction itself. But don't be tempted to cut corners, because once you've successfully thrown your hat in the ring you can't back out."

And remember that even if the house is in perfect working order, you may be outbid, in which case the money you have forked out is gone too.

Preparing for the auction

You will probably be bidding against builders with cash, so your mortgage offer, for the absolute maximum you are prepared to spend, should already be in place on the day.

"Those buying at auction need to pay special attention to their finance because of the extremely limited timeframe," says Melanie Bien, director of the independent mortgage broker Savills Private Finance. "Buyers have to put down 10 per cent of the purchase price on the day of the auction and then pay the rest within 28 days so if you haven't already spoken to a broker or lender you may well struggle to get a deal agreed in time.

"The usual mortgages are, in theory, available but timing is everything and not all lenders will be able to process the mortgage application in such a limited period of time – a good broker will be able to guide you on this."

Ticking the boxes

It should go without saying that you need to physically inspect the property yourself before considering a bid. Try to talk to neighbours about the property and don't be afraid to do some digging if you have questions about the state of the home. Then employ a solicitor, giving them as much warning of the auction date as you can. You solicitor will need the Home Information Pack (HIP) the legal pack relating to the property, which includes documents such as the land registry details and searches on the property.

This is created by the vendor's solicitor and may even be available to download from the auction house website. But if you cannot find out or check information you need, alarm bells should start ringing. Auction properties can come with legal minefields like bad titles of ownership. Failing to spot these major flaws can have huge consequences for the cost and validity of your property purchase.

On the day

You will need to go to the auction house with your deposit worth 10 per cent of your maximum bid, your solicitor's details, two forms of identification and your auction catalogue. If you don't have these you can't and shouldn't bid.

The auction house catalogue, containing the details of the property for auction and conditions of sale, is part of the legal documents relating to the sale, and must be accurate. But the vendor's solicitor can also include special conditions such as a shorter completion time.

Failing to meet these deadlines, for example, could mean a huge, unexpected interest charge. So ensure you are aware of any "special" or "extra conditions" to the sale.

On the day, there may also be an "addendum" or "announcement" sheet with further information relating to the property. Once in the auction house your first job is to seek this out from the enquiries desk. If anything doesn't make sense, ring your solicitor to clarify. It is assumed that you will be aware of all the details of these documents by the time the lot comes up.

Keep a lid on it

Finally, an auction property is only a bargain if you pay the right price. It sounds obvious, but it is crucial to factor in all your costs and fees when you decide your final, maximum bid. A number of auction websites have calculators to help you work out the grand total.

Once you have that figure you have to stick to it. Don't get carried away in the excitement of the moment. The guide price is the minimum the buyer expects, the reserve price is the minimum the property will be allowed to sell for.

The auctioneer is after the best possible price, so write your maximum bid in big letters and have it in your lap if you have to, but don't him or her push you over it, and bear in mind stamp duty thresholds when the bids stack up. If everyone backs off around £250,000 its because the stamp duty bill has just doubled.

And whatever you do, when the auctioneer's gavel is on its way down for the third and final time, don't move a muscle.

Case study
'I saved £100,000'

Robin Pearce, 53, bought a large Georgian property in a prime Southampton location at auction, and saved almost £100,000 on the original asking price.

"We are really pleased with the property," he says. "It is a four-storey terrace which dates to around 1845 and is split into two large flats.

"It was originally on the market with an estate agent at £345,000, but didn't sell, so it went to auction with a reserve price of around £240,000.

"I had the finance in place because a sale fell through, and because the flats are freehold it ruled out a lot of people who need mortgage deals. So we got it for £250,000, just under the stamp duty threshold."

"We did well, but I think the real price of a property is what it sells for, not the original asking price."