Buying off market -v- buying at auction

If you need help and advice with regard to buying off market, buying at auction, structural reports, building surveys, engineers reports, defects reports for things like cracks in properties, dampness, condensation and movement, home buyers reports, etc, please call 0800 298 5424 for a friendly chat.

Auction pre-viewing

We recently attended with one of our investors at auction, or to be more accurate, viewing of the properties prior to the auction. One of the lots for sale was an entire estate of industrial units and small offices, nearly 30 in total. As you can imagine a considerable amount of money was down as a reserve price, particularly as the units were predominantly fully occupied, without any major debtors.

What intrigued us was the shear number of people that came to look at the investment. There were approximately 40 bidders in total, or more correctly we should say 40 viewers of the property in total. The viewers at the auction ranged from institutional property investors looking for investments, perhaps for national pension funds, to SIPPs (self-managed personal pension) funds, with their surveyors (as we were), to property companies, both local and national; looking to add to their portfolio of properties, to local individuals, to companies that had leases on the units and were looking to secure their position.

What went through our mind was that there were 40 people at the pre-viewing, which was a very large number for this type and value of investment. It would no doubt be argued by the agents that they had pitched the guide price correctly to gain interest, but we would argue that they had been unfair and unrealistic, and possibly misleading, with the returns on the yields, based on the rental income looking extremely good, but then again, you could argue that this is what their job is - to get people to the auction.

Off-market property

Compare this to an off-market property that we looked at earlier in the week. When we use the term off-market we mean one that isn't officially being marketed through an agent, or auction house, where we have been advised that the property is for sale. We viewed it in relative peace and quiet of just us and we spoke directly to the owner, whose details our contact had passed to us. He advised them of how much our investors were paid for it. They advised us of the timescale (this is usually short so make sure the funds are in place). He later came back and agreed our price and ensured that the transaction was completed in the agreed timescale and, interestingly enough, the property owners either side were not aware that the sale had gone ahead.

Compare this to the auction

Comparing this to the auction that we mentioned earlier, there are many, we would argue too many, people looking at the property. Amongst those will be people that perhaps had been made redundant, or had large bonus pay outs, etc, who would bid in ignorance of the true value of the property and perhaps push the price above the market price. Remember the auctioneer is getting commission to sell the properties at the maximum price they can. So, the chat that they had with us and the other potential investors was aimed at us seeing the potential in the properties not the problems.

Buying property unemotionally

It was interesting that the investors that we were with commented that they were disappointed, having carried out quite a lot of work, and more importantly time, on assessing the location, investigating local competition, buying the legal pack, talking to the Local Authority (all of which we have given them guidance on) and also the costs that they were occurring for our time, and then 40-odd other people had turned up.

Using someone, such as ourselves, to give an independent view also helps take the emotion out of the process, as we are aware that many people are not only looking at that property in the auction but also many others, and could only afford to bid on one, or a few at the most.

Knowing the property market

We were able to help our investors considerably as we know the property market. We were aware that institutional investors, due to the type of construction, wouldn't be able to buy property, so this reduced the numbers from 40 down to about half at 20. We are also aware that some would be put off with only being able to gain access to two of the 30 units, one of which had been a dilapidated office complex and the other had been, what we could best describe as a garage-sized unit that had been converted. Others had concerns over the rather unusual leases, which meant that the landlord paid the electricity, gas, etc. Others were looking at the large expanse of flat roofs; others had noticed the big bills for fly-tipping, which had been shown in the accounts for the previous years. The fact that some of the larger property companies had to actually collect 30-odd relatively small rents, in their eyes, was more trouble that it was worth, when they could have management time spent on collecting 30-odd large rents.

This probably left about 10 serious bidders, of which we knew some would drop out because they had found something better. Some would drop out simply because they couldn't make the auction date, for one reason or another. We noted that some were asking about local managing agents to actually run it for them, others were aware of the rates, that would have to be paid on the empty units and some more informed people were aware of the rates that wouldn't have to be paid on the empty units! Again, some of the informed people were aware of the asbestos problems and the various reports that the sellers had offered, etc, etc.

What can we do for you at auction?

Our brief was to advise on how much to bid at auction and offer a swat analysis (strengths, weaknesses, opportunities and threats) and to give good commonsense advice, which we duly did and returned the next day via our internet website, which is accessed via a password.

More importantly, what can we do to obtain for you off-market properties?

Phone us about becoming a retained client. For those that haven't come across this term before: you need to offer us a brief of what you are looking for and we will match it, not just on the property side, but would also look on the operational side, if it is a business venture you are looking for. We treat all properties as if we were buying them ourselves.

If you truly do want an independent expert opinion from chartered surveyors with regard to buying off market or at auction, or any other property matters please call 0800 298 5424 for a friendly chat .

If you have a commercial property, be it leasehold or freehold, then you may wish to look at our Dilapidations Website at www.DilapsHelp.com and for Disputes go to our Disputes Help site www.DisputesHelp.com .

We hope you found the article of use and if you have any experiences that you feel should be added to this article that would benefit others, or you feel that some of the information that we have put is wrong then please do not hesitate to contact us (we are only human).

The contents of the web site are for general information only and is not intended to be relied upon for specific or general decisions. Appropriate independent professional advice should be paid for before making such a decision.

All rights are reserved the contents of the web site is not to be reproduced or transmitted in any form in whole or part without the express written permission of www.1stAssociated.co.uk.

We have produced the following articles about buying and selling at auction which you may find interesting:

Buying property at an auction

How to buy a property at an auction

Buying a commercial property at an auction

Buying off market -v- buying at auction

If you truly do want an independent expert opinion from chartered surveyors with regard to buying off market or at auction, or any other property matters please call 0800 298 5424 for a friendly chat .

If you have a commercial property, be it leasehold or freehold, then you may wish to look at our Dilapidations Website at www.DilapsHelp.com and for Disputes go to our Disputes Help site www.DisputesHelp.com .

We hope you found the article of use and if you have any experiences that you feel should be added to this article that would benefit others, or you feel that some of the information that we have put is wrong then please do not hesitate to contact us (we are only human).

The contents of the web site are for general information only and is not intended to be relied upon for specific or general decisions. Appropriate independent professional advice should be paid for before making such a decision.

All rights are reserved the contents of the web site is not to be reproduced or transmitted in any form in whole or part without the express written permission of www.1stAssociated.co.uk.