Buying at Auction

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Buying at auction – how it can work for you

I hate buying at auctions

buying at auctionThere, I’ve said it. I hate buying at auction.  I hate the very idea of selling at auction. Except when it all works well and I get top dollar!

Why do I dislike buying at auction?
As an investor I like to find less exciting properties and add value to them. This might be by way of painting and carpeting or simply finding a good tenant who is paying the market rate. In either case it’s not likely that I’ll be looking for a “premium” property that demands an auction sale.
I also like to do my homework before I buy. I like to take my time and find out how much the vendor wants before I waste any money or further time on my due diligence. I can’t easily do that when buying at auction.

If I want any reports done I need to pay for them first and “hope” that I can secure the property for a price that I’m happy with. If I’m out of town, or double booked it makes it hard for me to buy at auction.
All these things can in fact work in my favour however.
Why?
Because if buying at auction is hard for me, it’s also equally difficult for the other potential purchasers. That’s why!
I’m currently looking to spend some of the money I pocketed from the sale of my family home. The cash is burning a hole in my pocket. I scan the web looking for houses I can both live in and add value to. This is kind of limiting. It’s pretty easy to filter out the ones I don’t want. They’re usually the pretty ones I can’t do anything to because they’re already done up to the nines.

When buying at auction can work

I’m looking for problems to buy. They don’t usually show up as auction candidates. But occasionally they do. Be prepared to put in some ground work and spend some time.
I recently found a potential home that I could enjoy living in for a few years. It also needed some cosmetic work. In fact, no work had been done to this home for a number of years. And yet, it was for sale by auction.
I suspect in this case it was a matter of needing a sale by a certain date – like soon.
I did take the time to inspect the house quite thoroughly over 3 different viewings. I determined that there was nothing actually “wrong” with it, but it was just very tired. It was quite a good candidate to fix-up and it was not overly appealing to the average home buyer who is looking for the solution.
I attended the auction with a pretty low and conservative number in my mind. In fact there appeared to only be 1 real bidder amongst the rather sparse crowd. I waited till the property was “on the market” and did put in a live bid. The house sold for more than I was willing to pay on the day, but it was still what I would consider “good buying” I just didn’t really want the house as my own home enough to pay any more.
But what if I was the only bidder?
I can tell you I would have ended up with the property at a bargain price and been happy with the purchase.

How often will buying at auction be profitable?

I would estimate that there is potential to buy well in maybe 1 out of every 10 auctions. Most sell for fair value and 1-2 out of 10 are runaway success for the vendors. But there is still an opportunity for the astute investor if you’re willing to put in the time on the ground to seek out those opportunities.
Keep looking and don’t give up.

Until next time,

 

buying at uction

 

 

 

buying at acution

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