one of the biggest mistakes that I see
newbie property investors making is they
watch a few episodes of homes under the
hammer then they rush off to the auction
room stop bidding for property like it's
going out of fashion Now Auctions can be
a great place to buy property but only
if you know what you're doing in this
video I'm going to give you the do's and
don'ts of buying property at auction
[Music]
hey if you're watching my videos for the
first time my name is Saj Hussain and on
this channel I share with you my 15 plus
years of property investing experience
to ultimately help you get further
faster in your on property investing
Journey auctions can be a great place to
buy property but only if you know what
you're doing the reality is auction
houses are set up by Traders to sell
property mostly to other property
professionals so when the inexperience
Venture off into auction rooms they need
to be careful that they don't get their
fingers burnt auction rooms can also be
a great indicator of what's going on in
the market so when their auction house
you're really busy they're selling most
of the lots that shows us a lot of
confidence in the market when we start
seeing a lot of unsold Lots ones that
not selling at the auction this shows
that the confidence in the market is
starting to slow down so in recent time
you'll have seen packed rooms at auction
houses whereas during the last credit
crunch in 2008 nine I remember at that
time you saw big auction rooms maybe 10
12 people sitting in the room and most
the chairs were empty now the property
Market is certainly going through some
change right now however I don't think
we're going to end up where we were
before with these auction rooms empty I
certainly think there's going to be some
rich pickings in those auction rooms
there's in fact three ways to buy
property or auction one is actually in
the auction room itself you turn up put
your hand up which is the way where most
people are familiar with the other one
is to buy a property before the auction
I do a deal with the auctioneers before
it goes into the auction room often
you'll be paying above the guide price
you'll be paying a figure that's maybe
acceptable to the seller to do a deal to
prevent other people bidding on it as
well the third way to buy properties at
the end of the Yorkshire when the
property is unsold so properties that'll
go through the auction and they're left
unsold it's still possible to do a deal
with those properties so they're the
three different ways you can buy now
traditionally going along to the auction
room and bidding there but more recently
with kovid and the way we had lockdowns
a lot of auction houses moved to the
online method where you could bid online
getting a deal in the auction is all
about knowledge it's about having the
information so before we get started
before we actually start bidding a
property we need to be looking at what
auctions are coming up but actually if
we can go to some auction housing
beforehand just get familiar with the
layout the process how they work the
catalogs the registration process the
bidding process just to get familiar
with how things work before you actually
start bidding the catalogs also give you
a good idea in terms of what the
registration process is but also how
some of those fees work as well but then
when you are ready to actually bid on a
property what you want to be doing
before the auction happens is to be
looking at those properties to go and
view the properties now when we're
viewing properties unless we've got some
experience after we may not know what
we're looking for so we want to take
somebody experience with us and
generally a survey on a property is an
ideal thing to do but if you think about
this you're going to maybe be looking at
say five six maybe even 10 properties
that you see at the auction and then if
you had a survey done on every single
one of those or maybe three four five
hundred pounds a time you could be a lot
of money out of pocket because you are
not going to be purchasing all those
properties and it may even be walk away
without winning any of the bids as well
so it's not so practical to be able to
do that which is again why we're saying
this is really for the professionals and
one of the things that you could do to
really protect yourself is to use
someone like a builder a competent
Builder that can go with you to have a
look at the property and then they can
give you some indication of what work
needs to be done and this is not quite
the same as a survey but it helps give
you some understanding of that property
depending on your level of experience
now what you see physically building
wise is only one aspect of it the other
side of it is the legal side either the
titles correct or the paperwork in order
is any issues with the documentation so
you want to download the legal pack this
is all the information that will be
provided for the sale and after this
will go to the solicitors for solicitors
to review but when you're potentially
bidding on a property you want to look
at this documentation beforehand to know
what it includes and what's in there and
what the terms of the sale are before
you start bidding on that property now
maybe you review the documentation have
some understanding what's going on but
the best thing to do is to work with a
solicitor and explain to the solicitor
you're looking to purchase to buy
something from the auction and it may
not be every property you send them so
you're essentially asking them to look
at a few different legal packs and agree
a price with them with a view that
you're probably only going to purchase
one under that property they'll do the
conveyancing for you and that way
they're not charging you full price to
review every single legal pack which
again just like the surveys can start
matching up quite quickly but this is
how you build your own skill up you
actually do the doing by walking around
with the builder looking at the property
get them to explain what needs doing
what you need is doing get the
solicitors to review the paperwork for
you get them to advise and guide you
whether it's a good deal or whether
there's some problems they can see
within the paperwork itself when the
property is listed at auction also have
a guide price and that guide price isn't
necessarily the sale price or the price
it will get sold for but it's a guide of
where they think that property will be
and often it can be misleading because
that guide price may be where the
auctions start Arts from as opposed
already ends up and then there'll be a
reserve price as well which they will
not have announced and you will not know
but generally speaking the reserve price
tends to be about 10 more than the guide
price so for example if the guide price
is say a hundred thousand printed in the
catalog the reserve price may be a
hundred and ten thousand and what that
means is if the price in doing the
bidding doesn't actually reach 110 000
it won't be sold it'll be withdrawn from
the auction it's only if it goes beyond
110 000 that a sale can actually take
place during an auction when the
auctioneer brings that hammer down and
says sold to the lady in the blue dress
over there for 450 000 pounds it doesn't
actually mean that she's going to be
paying 450 000 pounds because we need to
be aware of the other fees and costs
that could be involved as well so for
example when we're looking through the
documentation we need to make sure for
example there's no VAT on the property
because some properties might have VAT
on them generally more for commercial
properties and if there is v80 that
you're aware that there's vat and
sometimes it'll also be fees that you
need to pay towards the seller's legal
cost so there might be a contribution of
fees that you need to pay for the seller
there'll also be a fee that needs to be
paid to the auction house as well who
are purchase that property through them
as well so it's important to understand
what these costs will be so when the
hammer goes down and that price is
announced that that figure actually is
not what's paid because there'll be
other fees that will need to be on top
of that and being able to work out all
those are beforehand will certainly be
in a good position knowing what your
true budget is the purchase may also
attract stamp Duty as well so that's
something else we need to be aware of
and how that might impact the overall
price in terms of what we pay for that
particular property the other thing that
we want to sort out nice and early
before we even get to the auction houses
to know who the buyer actually is going
to be and by that what I mean not who
you are because clearly you know who you
are is it yourself that's going to be
purchasing that property in your
personal name or is it a partnership for
example that's going to purchase that
property or maybe you've even set up a
new limited company that's going to
purchase that property into there
because knowing these things means that
you can take the time to get organized
beforehand because when you do the
registration process because the
registration details that are on that
document that's who they'll be the buyer
for property so when the hammer goes
down that's the buyer of that particular
property and this all comes back down to
knowing what you're going to do with the
property before you even start which is
not really the focus of this video but
having a clear plan of what's going to
happen with that property will mean that
you know how you want to acquire whether
it's going to be a limited company
personal name it's going to be a home
it's going to be investment it's going
to be a flip it's going to be HMR
whatever it is that you're doing with it
now before we get onto the auction room
itself one of the final thing to be
thinking about is where's the money
actually going to come from now it might
be you have loads of cash behind the
sofa which is fantastic you're going to
be using that cash to purchase but for
many people they'll be using some kind
of funding now we need to think about
where is that funding going to come from
often people make the mistake but once
they've agreed the purchase I.E the
hammer goes down they put the hand up
it's sold then at that point they start
thinking about the money and where's the
money going to come from but really the
sensible thing to do is to be organized
in the funding before you even actually
go into the auction room and this for
example could be bridging or bridging
Finance or finance that specifically for
auction type or property often
short-term lending you can approach a
Bridger or a broker have a conversation
with with them that you're looking to
purchase at an auction so they can look
at what type of funding they can set up
for you so it may not be specific for
that property but what they'll be doing
is to make sure that they're happy to
lend to you as an individual and that
might tell you in principle will be
happy to lend you this amount of money
up to this type of value or property
will that give you a broad indication
knowing that if you do bid for a
property how much is it that they're
probably going to be able to fund you on
that deal of course the other advantage
of using these types of lenders is that
they specialize in speed because these
General will be Speedy transaction
you'll have to wrap up quite quickly
most people assume that auction sales
are 28 days and often that is the case
but it isn't always the case which is
another reason why it's really important
that you're reading the legal pack
because that will explain if there's a
shorter time or any difference around
that finally it's the big dates the day
of the auction you're really excited you
get up energize you go to the auction
and you're excited it's buzzing there's
hundreds if not thousands of people in
that auction room and you're thinking
hang on a minute there's only 100 Lots
in the catalog if all these people are
here to buy property they're going to be
in trouble and sometimes that can be the
case there's a lot of people chasing the
same property or other times it could be
there's just people there networking
meeting other people chatting as opposed
to there to buy property but if it's a
full room often that means there's a lot
of people chasing the same property now
it's important that you'll have already
worked out exactly what your numbers are
you've calculated what's the maximum
you're prepared to pay on any particular
lot and beyond that you're going to sit
on your hands right it's really
important that you stick to your numbers
because the way the auctioneers work a
lot of it is psychology you get moments
to make a decision you'll be under a lot
of pressure so if you already worked out
the numbers you can stick to those when
it comes to your lot the auctioneer will
display on the screen you'll see which
property is and then they'll start the
bids it doesn't mean that you need to
stick your hand up straight away to
express an interest to say hey you want
to start the bid in fact I would do
quite the opposite I'll just sit and
wait and when I sit and wait what I'd
ideally want to do be standing or
sitting somewhere where I can see the
rest of the room so I can see who else
is interested effectively I'm looking at
the back of everybody else's heads to
see if there's anybody else raising
their arm and how much interest there
might be in that property because if
there isn't a lot of interest in the
property I don't want to be the one that
starts at bidding off I want to stop and
wait to see if somebody else will start
the bidding in fact my preferences or
auctions what I will do I'll jump in
late when all the auctioneers are slowed
down when it looks like you're starting
to reach an end and I would normally
jump in at that point if it's still
within the range of where I want to bid
now earlier I talked about a guide price
and a reserve price so if the guide
price is a hundred thousand and the
reserve is a hundred and ten thousand
what the auctioneer is allowed to do is
take what we'd call bouncing off the
wall or fake bids if you like what that
means is if they start at a hundred
thousand pounds and they look around
they say oh 105 over there 106 108 109
and it may be there's actually nobody
there that's bidding the auction is
legally allowed to do this to take this
up to the reserve price beyond that they
can't take these fake bids but after
that they could drive the price up to
the reserve price because underneath the
reserve price the property can't be sold
anyway so when you're standing in an
ideal place you can see what's going on
the room you'll get a sense of what's
going on you'll see if there's any hands
or indication going up or is the auction
here just essentially just trying to
drive into us and drive up the price now
remember they're professionals at this
so when you get to your final figure and
you think hey that's it we're at a
hundred and eleven thousand and that was
my limit I'm not going to go beyond that
and the auctioneer looks at you and he
says hey look you're not going to let
them get it for a thousand pounds go on
go one thousand pounds more you come all
this way you've got to get that you want
you don't want to miss out and you'll
think yeah he's absolutely right okay
another thousand and then they'll do the
go over to the other side and they'll
encourage them to drive the price up
because that's what they do their job is
to get that price up as high as it
possibly can and often people are not
used to this amount of pressure and
making decisions in such a short space
of time which is why it's really
important that you worked out your
numbers and your limit beforehand and
you absolutely stick to them when the
auctioneers gavel Falls and you are the
winning bid that means you've just
purchased the property you are then at
that point Bound by the terms and
conditions and you have now formally
exchanged contracts so that means you're
committed to the purchase and the seller
is committed to selling the property to
you there's no backing out from either
side if they are the penalties can be
quite severe remember at this point your
also should be ensuring the property
because if anything happens God forbid
if it burns down during the time that
you've just won that bid to the time
that you actually get the keys on
completion if anything happens that
property that's your responsibility so
you want to make sure you've got some
insurance cover in place as well at this
point your solicitors will take over and
do the work that they need to do and
your funders or your lenders your
Bridges whoever you're using for the
finance they'll get organized on their
side and get that bit done now let's say
the figure goes Way Beyond what you
thought it was going to be which is
sometimes the case especially in a hot
market like this all is not lost that's
absolutely fine it's not an issue
there'll be other deals that will come
along as well and you should have an
abundant mindset when it comes to
auctions and not a scarcity one thing I
need to get this deal because often
they're the people that pay the most
money and most often will not get the
best deals but let's say on the other
hand the property doesn't sell there
wasn't either enough bids on it or it
didn't quite reach a reserve price then
that property will remain unsold what to
do with those properties once it's been
marked as unsold is to go and talk to
the auctioneers not the one obviously
doing the auction right now but the
other members of Team you can have a
chat with them about what will happen
without property what is it that they're
looking for and essentially what you
want to do is start a conversation
because the auctioneers will still be
Keen to do a deal they'll still want to
get this property sold even if it didn't
go through the normal auction process so
the seller at this stage would likely to
be more flexible because if you think
about it if it's somebody that's looking
to sell a property in auction often
that's because they want the speed they
want the certainty they want to know
that deal is going to get done quickly
but if it goes to the auction it doesn't
actually sell that doesn't really leave
a many other options so the seller may
be flexible at that point to try and get
a deal done and often you can do a
better deal by picking up deals that
were unsold at the auction then rather
than bidding for them during the auction
itself
what I've talked about is really scratch
your surface when it comes to auctions
there's so many tricks and things that
go on in auctions that you really need
to take the time to understand how an
auction Works before you go bidding
within an auction one other tip that I
do want to leave for you is when you're
looking at property if you can spot
something that's out of area what that
actually means is for example you're
looking at a London auction where a
Birmingham property is listed now often
what that means is that the the they've
put it into an auction which was easy or
convenient for whoever's selling it as
opposed to where the audience might be
so most people in London might be
looking for London property as opposed
to a property that's a couple hundred
miles away 150 miles away and what
you'll find with the property like that
is there's a lot less interest in that
property so often the figures achieved a
lot lower so they can be great
properties to look for so these are
properties that are what I'd call a bit
of a misfit they're out of our area
listed in auction house that's nowhere
near the property itself hey if you
enjoyed this content do me a favor click
on my face over here to subscribe to the
channel the YouTube algorithm tells me
many of the people that watch these
videos they're not actually subscribers
you're enjoying the video but you're not
subscribed and it really helps me out
just reach more people so I really
appreciate if you just click on my face
over here subscribe to the channel and
then once you've done that then click on
this video over here where I talk about
the difference between buy to sell or
buy to rent so whether you should be
keeping property for the long term or
you should be flipping them on so when
you're looking at auctions which is the
right strategy for you so I look forward
to seeing you on this video next