Forget what you heard, you can DEFINITELY still get AMAZING deals in Auction.
I have consistently outperformed any estate agent deal by learning over the years where, when, and how to buy in Auction to get those deals that you can never find on the market or at least will be significantly harder.
For Newbies to the auction stage often the most glaring and obvious mistake is thinking the price of the property is such a great deal, there is nothing wrong with the property.
There are many reasons a seller would choose to list in the auction from wanting to achieve a quick sale, needing access to cash, needing to get out of a legal obligation such as high service charges or just to get rid of a problem property that could have legal, structural or neighbourly issues. The Auction arena assumes that buyers are professional and know what they want and how to resolve any issues they encounter and hence the primary reason why you can often find discounted properties.
Below, I cover the 3 main & glaring mistakes I see new investors make when they buy in AUCTION.
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I’m amazed at how often I hear I have found an amazing price and it ticks all my boxes, only to find out the property has only 12 years left on the lease which will cost an additional £150,000 to extend to represent the full value of a similar property in the area.
This means they will often not look at the amount of time left on the lease. This is most especially because the catalogue will often say under the lease length “99yr from 1960” which actually means that if we are in the year 2022, there are only 37 years left on that lease.
This is a concept that eludes people who are buying for the 1st time
in AUCTION and think they have found a great deal. Sadly, they often realise this when it is too late! For the more professional buyers, there are strategies they use to secure these types of properties but this will have been factored into the price and they are never caught unaware at the point of exchange when the hammer goes down.
It is usually the last document in the pack with amendments that a new buyer may not have picked up on. Here is where you will find special clauses, fees and premiums included which may not have been mentioned earlier.
Often the fees here mean that the price you think you’re getting could include an additional 2-20% premium which could easily add an additional £10,000 and upwards which you might have not factored into your bid price, so always, always check this document and any addendum.
It might also state reduced completion times or notice periods which can greatly impact the amount of time you have left to complete.
Keep an eye out for the type of Seller: Often sellers can be
Local Authority or Housing associations or individuals looking to pass on all their costs within the Special conditions of sale.
For occupied properties, you should always check the nature of the tenancy. Often you find that special type of tenancies means the property is UNMORTGAGEABLE OR HARD TO SELL (for example Regulated tenancies where the tenants have special rights to rent control, tenure, etc).
By viewing the property, you can pick up on some of the main factors that indicate the nature of the tenancy. Often if the property is tenanted, you might not be given any access to view the property prior to the auction, so you will need to do your due diligence and if you are not satisfied, then you can decide if the price is cheap enough for you to take on the risk OR just walk away.
If you do decide to take on the risk, then do as much as you can to find out the details of the property, get the legal pack reviewed by a lawyer, and in extreme cases, I have heard of people going to knock on the property of neighbors doors but it’s not an approach I can recommend.
