Guide to Buying Property at Auction
In today’s episode of the Progressive Property Podcast, Kevin McDonnell discusses action, buying at auction, selling at auction and the difference between buying at an auction and buying through estate agents. Learn the tips you need to know before buying at auction and the types of auctions that offer the best property opportunities.
KEY TAKEAWAYS
What’s the difference between buying an auction and buying through an estate agent? the main key difference is, when you purchase the property through estate agents, you get the opportunity to go visit the property, have a look at it may be more than once, maybe two or three times even just so you're really comfortable with that property, you could get a builder to take a look at it and get some quotes on the maintenance, so you're really clear on what your numbers are before you buy, but also, when you put your offer forward and you start the process of purchasing, you can change your mind. So if anything pops up, if your circumstances change, you can back out of the deal. The difference with an auction is once you secure the purchase, so if your bed is the highest bid on the day of the auction and it's higher than the reserve price, then once that hammer drops, you are legally bound to buy that property within generally 28 days and if you don't buy it, then you would lose your 10% deposit money. So they the owner of the property would receive the 10% deposit money plus fees in some cases, and they'd be able to have their property back and maybe stick it in another auction. Buying at auction, you can get some amazing deals, but you can also get what I call property dogs, and they are properties that are not anywhere worth what they may think they're worth and properties that have got problems. So traditionally if you go to an estate agent to sell a property and maybe it's got some issues with the title or a Scott some covenants on it, or it's got structural issues or subsidence issues, any type of issue with the property, that would be picked up really quickly through an estate agent purchase, but in auction, if you don't do your due diligence, if you don't do your research before the auction, if you don't look at the property, check it out, then you could end up bidding on this property, purchasing the property having to put down your 10% deposit, and then finding out somewhere between the drop of the hammer and the 28 day completion period that you haven't quite bought what you thought you'd bought. Tips you should have before buying at an auction. Before the bidding starts, you've got an auction pack, which is basically a legal pack of all the information that you need around the property, you need to look at this legal pack. If you are not familiar understanding legal packs, get a solicitor to read through that legal pack and make sure that it's very clear that there are no issues with the property. Number two always views the property. Showing up for the auction and showing up on time is very important because you want to see if there's another interest in the property, see what other people are talking about, get into some conversations. Don't let anybody know, though, that you're interested in that property or which one you're interested in. When the bidding starts, you have to watch out for the auctioneer and what's called off the wall bids, because what you'll see is the auctioneer is trying to show some interest, and he'll start bringing the price up and they can do anything they want between the first bid and the reserve price because it's not for sale. So they'll start taking bids in what's called off the wall and they'll point and random people, but not at any specific person. Now there are two different types of auctions. Online auctions and actual physical auctions where there are an auction house and you have to show up and you're sitting in the audience. Reserve price. So how an auction generally works is you have a lot, so each property is listed within a lot and they're listed from lot one, for instance, if this 40, 50 properties in the auction, it will be listed from lot one to lot 40, lot 45, lot 50 in an order, and lot one is the first property that goes up for auction on that day, then lot two, lot three and so on. Now, each property when it's listed and advertised for the auction has what's called a guide price. Now the guide prices what the auction has suggested the property should sell for and then it also has the reserve price. Now the reserve price is the key because the reserve price is the price that the seller so the owner of the property is telling the auction has, if it hits that number, so the reserve price or higher, they will accept the offer and the property can be sold, but any offer lower than the reserve price, then it's not sold.BEST MOMENTS
"What generally happens with the guide price is auction houses want to get you in early and they want to build interest and what you'll often see is the first few lots on an auction are priced with a really low guide price and the idea of this is not that they're priced wrong but the Auction House is trying to build interest in the auction and the trying to get people into the Auction House early." “Learn from other people's” “Surround yourself with people that can help you out when you are caught up in some kind of trouble.” “You can lose money or make money from property.”VALUABLE RESOURCES
facebook/progressive property community.com youtube/progressiveproperty.com ly/nmdbook.com The no money down property investing bookABOUT THE HOST
Kevin McDonnell is a Speaker, Author, Mentor & Professional Property Investor. He is an expert when it comes to creative property investment strategies. His book No Money Down: Property Invest talks about how to control and cash flow other people’s property to create financial freedom.
CONTACT METHOD
Facebook: https://www.facebook.com/kevinMcDonnellProperty/ Official website: https://kevinmcdonnell.co.uk/ https://www.amazon.co.uk/No-Money-Down-Property-Investing/dp/1909846767/ref=sr_1_1?s=books&ie=UTF8&qid=1553015287&sr=1-1&refinements=p_27%3AKevin+McDonnell by Kevin McDonnell
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