Buying, Flipping and Trading Property at Auction
Thursday 12th December 2024
It has been an interesting week so far in the auction world. Here are just a few observations.
Flipping
If you are going buy property to flip, ensure that you have nailed the end value having considered ALL costs. This end value should be one that can be supported with evidence. It is not your opinion that matters but that of your buyer’s mortgage company valuer. There is not much point in ‘achieving’ an above-market price if the buyer cannot raise mortgage finance.
My valuation of this property was considerably lower than the agreed price where the buyer eventually dropped out because of their inability to raise finance. This could be for many reasons, but one factor would certainly be that the property would not value at the agreed price.
Subsidence and Enthusiasm
I went to view a property only last week and there was strong evidence of subsidence and damp. The viewing was a Saturday and there were many younger people from out of town quite excited about it and were talking about the renovation, kitchens, bathrooms, and the like, as if they were starring in a TV programme. I did interject and pointed out the obvious, but they probably thought I had an ulterior motive.
There were no searches in the legal pack, but given my knowledge of the area, I know how they will look. It is not a showstopper for some mortgage companies, but this property would require a damp and timber survey and a structural engineer report, which would open a Pandora's box.
The sting in the tale is that they paid top dollar for the property, and I was genuinely shocked when I saw it. I would expect to see the property relisted in the near future.
Subsidence and Professional Reality
Yesterday, we looked at a few properties near Manchester, and even though the properties on paper looked good when we got there, both were like a boat listing to starboard at 20°. The same seller tried to hide cracks on the outside to the rear of the houses but just made it more obvious. Will these properties sell? They may well sell to cash buyer if the price is right but also my experience of properties like these is they sell to the inexperienced and only when they go for mortgage valuation do they realise they bought someone else’s problem. Building insurance would be a problem too.
You cannot effectively ‘view’ a property from a picture or video. You must view the property yourself, and if you are new to this and unsure about what to look for, bring somebody who does with you.
I have only ever bought a property blind once, many years ago, but I have been dealing with the auction house in question for many years. I also knew the seller and had bought other blocks of flats from them. I also had other properties on the road. It is not as ‘blind’ as it sounds, but the point remains. You must view the property or instruct someone else who knows what they are doing, like a RICS building surveyor or contractor. Those who have attended my workshops will be familiar with this 'title split' property. Three of the six flats paid for the acquisition, and the other three were free.
Eyes Wide Open
Property auctions are fantastic for both buyers and sellers. The buyer needs the skill to sort the wheat from the chaff, and if they do, they will bag an exceptional bargain significantly below market value and with inbuilt equity right from the start. If they buy the wrong property, they will have all sorts of trouble trying to sort it out. There is nothing like education and learning from people with many years of experience buying and selling properties in this way.
If you want to quickly realise cash or there is a problem with the property, either structurally or legally, an auction is a fantastic route to sell.
Trading
Further, if you are trading property, auctions are a great way to turn a margin and move on to the next quickly.
I think 2025 will be an exciting time to be in the property auction arena and will present outstanding opportunities for the astute buyer.
