One of the first things that a lot of people think about is the fact that purchasing properties at auction cheap is a myth. This is because you know people get greedy in auctions and you get into bidding wars and consequently you pay beyond the price you intended to pay before you walked into the room! However you need to know how to buy properties well in auctions as it is easy to get emotionally attached to the property and then auctions are set up in such a way that if you want to offer a lot of money you can do that very quickly at auction. Consequently a lot of people fall for that and overpay for properties in auctions but there are certain properties that people are scared of and that they don’t know how to solve the problems. With such properties you can get really good deals with them if you know how to purchase them and deal with the issues as you are likely not to get as much competition.

Some people say purchasing through estate agents is like playing football however purchasing from auctions is like playing basketball. The key differences between the two is the fact that when you are in an auction and you make an offer you have to immediately follow that up with paying a 10% deposit. Additionally  in the auction you also get the legal pack in advance, you do the due diligence and the process is very quick and streamlined. The sellers are totally committed to selling the property and if they cancel it they have to pay the auction fees. However with estate agents you tend to get people who test the market or try to put a property at a certain price to see whether they can get it and it normally it is overpriced. Whereas with auctions it starts with a reservation price. Therefore the two funnels are each a totally different dynamic.

There are a number of methods for searching for properties in auctions one of which is when you see a property on rightmove and then noting it is going to auction and go to the auction or alternatively you can be more structured by following an auction that is local to you and view the catalogues, go to the auction and look at the process or you can sign up to  a search information portal that is the rightmove version of auctions such as  www.eigroup.co.uk.  You would be able to see all the auctions and properties in one place which makes it more efficient and streamlined.

In terms of what you are looking for when you are reviewing properties at auction is you are searching for properties you can potentially add value and properties that are potentially problematic. The reason for this is because professional investors like properties that put other people off and they know how to solve the problems and consequently they do not have much competition. For instance a three floor house could have been converted to three flats by the seller around 10 years ago that never had planning. But as professional investors we should educate ourselves in terms of how to do this and being able to solve such a problem and doing such with confidence. People may say that may be risky! As the owner has not been able to get planning permission etc… and then professional investors are taking on that problem are you crazy??? It may look risky however if you have the appropriate knowledge it is just a matter of following the process even if you purchase from the estate agent it is still risky but it is not apparent whereas in auctions the risks are apparent. For instance in the above scenario if you educate yourself you can check if you could get planning permission prior to bidding in auction by checking how long the property has been as three flats. If it has been for over four years and there has been no enforcement notices then there is likelihood you would be able to get planning on it. Additionally you need to ascertain whether the property has been used as three flats for four years without enforcement through meters checking whether each flat has its own utilities.

In terms of due diligence that you need to undertake before you go to auction you have to check the properties history on www.eigroup.com and see what the properties sold for in the past or whether it has been withdrawn or sold previously. Then you would go onto checking the planning history and then check the initial prices for the flats that you would get for the property and ascertain the GDV you would get.

Auctions are a fantastic place to purchase but you just cannot become emotionally attached to the property whilst bidding. You need to acquire the skill of purchasing at auctions. As the wise say knowledge is power…

 

Best of Luck!