Buying a property pre-auction

byrneand

Hi

I'm looking to buy two repo property which are being auctioned in the next two weeks. I have little experience of buying at auction and the properties appear to add up from a numbers point of view and generate good cash flow from day one (tenants have been at properties since 1998 and 2004). With this in mind, I am particularly keen to secure the properties and believe that the properties still offer good value at up to £5k (8%) above guide price.

Whilst I am confident on the numbers and financing side, the area where I do lack experience is the process of how to handle the negotiations since I have previously only dealt with E.A rather than auction houses and liquidators. The bottom line is that I would definitely like to add both properties to my portfolio... but at the lowest purchase price (as I'm sure you'll all appreciate!).

The dilemma I have is in whether to bid pre-auction and if so what price to bid:

1.) Looking at the past data for auctions in the North West since 2007, 80% of properties sold prior to auction have gone for between 5-11% over the guide price (with about an even split of 10% at guide price and 10% at 20%+ above guide price). This is a similar proportion for actual auction results.
2.) I do want the property and even at a price 10-20% above guide price the numbers stack up from a btl on an income point of view (but you obviously lose out on capital appreciation).
3.) Given that I are dealing with liquidators, I am considering offering the guide price for both properties and ask for them to be taken out of the auction. I am worried however that this may come across as naive, be rejected and lead me to follow-up with a slightly higher bid.... at which point does the auctioneer suggest that there is at least one interested buyer in the property and that it should be put into auction
4.) Or do I make an initial offer that is above the guide price that gives the bank an extra 4-5% on the guide price, state that this is my only offer and hope that it motivates the bank to take the property out of the auction.
5.) If this bid is rejected, then do not come back and attend the auction and bid there.....
6.) Or not bother trying to do anything pre-auction and simply attend the auction?

Any help or advise would be most welcome!

Doozergirl

There's really not as much analysis required as that. Make the best offer you would be prepared to make pre-auction and see what happens. You only really make one offer, then you'd go to auction and fight it out.

If you're able to go then unless you're desperate to secure the property, it's worth going.

We bought a property last year and we very nearly put in an offer before the auction but the bank took a little longer to approve the loan so we went to auction. We got it for £40,000 less than the offer we were going to make on it. No one else wanted it!

byrneand

Doozergirl wrote: »

There's really not as much analysis required as that. Make the best offer you would be prepared to make pre-auction and see what happens. You only really make one offer, then you'd go to auction and fight it out.

If you're able to go then unless you're desperate to secure the property, it's worth going.

We bought a property last year and we very nearly put in an offer before the auction but the bank took a little longer to approve the loan so we went to auction. We got it for £40,000 less than the offer we were going to make on it. No one else wanted it!

Thanks dozergirl! I think as you say, its probably just a case of getting on with it and biting the bullet.

Thanks for your advise and well done last year!!

Doozergirl

byrneand wrote: »

Thanks dozergirl! I think as you say, its probably just a case of getting on with it and biting the bullet.

Thanks for your advise and well done last year!!

Luck more than judgement, evidently

Good Luck

trumpton

I can't see them accepting any less than the guide price. As you say, the guide is set under what they think the property is likely to get. It is set low to generate interest. I would simply attend the auction, but with a firm limit of what you are prepared to pay. If you are really determined to buy, make your one best offer and see what they say. If you make several offers, that will just make them think the houses are sure to generate a lot of auction interest and they will wait until then.