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TODAY'S OTHER NEWS

Going bananas at auction

It is essential that you conduct your own due diligence before buying property at auction, as Andy Thompson, auction consultant at Edward Mellor, explains.

As well as the demands of day to day stuff, I’ve been juggling my evenings with renovating my own property and squeezing in a few property talks along the way. My last talk was with Scott at the Midway in Stockport. We were guest speakers for Claire Hamlett-Ledger’s ‘Property Mentor’ group and it was great to meet more eager investors, keen to pursue their property dream. This was my third talk in as many weeks and was a good opportunity to hone my skills whilst meeting more aspiring property investors.

I told the story of one of our very good clients, Alex, an American businessman now living in Valencia, who has grown a 30+ property portfolio with me over the last three years. He focuses mainly on East Manchester and now boasts a burgeoning property portfolio. Alex’s story is inspiring for people to see how successful you can be in a relatively short period of time if you set your goals properly.

As well as the success stories, I have fun telling some of the more shocking tales to come out of the auctions.

I remember an old client of mine, Malcolm – now based in Mayfair but originally from the East End and owner of the strongest Cockney accent you’ve ever heard. We got on well and worked together a lot in 2010 when Malcolm had bought a portfolio of 98 properties in North Manchester which he then sold off individually at auction.

Each auction cycle we would go through his list properties and decide which we should sell. We were working together so regularly and with such big numbers it was easy to lose perspective with what we were dealing with. Whenever I used to getting a bit over-eager, Malcolm would point out that we aren’t selling bananas here. But you’d be forgiven for thinking we might be with some of the stories I can recall of carefree buyers dropping a clanger on auction day.

Take Mr Singh, for example. We met a couple of years back, the day before one of our auctions. He was booked in for a chat to discuss how to invest in property. He had recently sold his company and together with a small inheritance and savings, he had £500,000 to invest. Apart from his family home, he had never bought a property before and was as green as grass with the concept of auctions and wanted to know how it all worked.

We discussed various investment models that would suit his circumstances and I explained how the process of buying a property from auction worked. Given that our next auction was less than 24 hours away, I suggested he should come along just to observe and get a feel for things.

Skip to the next day and Mr Singh arrived at the venue nice and early. I said “hello”, showed him around and explained that because he wasn’t bidding he didn’t need to register and could come and go as he pleased. It was a busy day. The auction room was buzzing, and I was run ragged all afternoon. I remember towards the end of the day, looking across the room as the crowds dispersed to see Mr Singh standing amongst the successful buyers… with a bidding paddle in his hand.

What was he doing with a bidding paddle? You guessed it! Without doing any homework, no checking of legal packs, no research whatsoever, he had bought five properties and spent his £500,000!  Just like that.

Sure enough, the next day he called me to say he had made a mistake. I had to deliver the bad news that he had already committed to buying these properties and if he was to back out he would lose his deposits, totalling approximately £50,000.

He had a very expensive lesson to learn. You might be surprised to hear this, but it is not an uncommon occurrence. Auctions are public - anyone can attend and bid for the properties.

If you want to take the risk and bid blind for a property you know little or nothing about, I can’t stop you. But, if I could give one piece of advice, it would be to do your homework first and take advantage of all the help and advice on offer.

Because as my mate, Malcolm, would say; “you’re not buying a box of bananas”.

Skip to the next day and Mr Singh arrived at the venue nice and early. I said “hello”, showed him around and explained that because he wasn’t bidding he didn’t need to register and could come and go as he pleased. It was a busy day. The auction room was buzzing, and I was run ragged all afternoon. I remember towards the end of the day, looking across the room as the crowds dispersed to see Mr Singh standing amongst the successful buyers… with a bidding paddle in his hand.

What was he doing with a bidding paddle? You guessed it! Without doing any homework, no checking of legal packs, no research whatsoever, he had bought five properties and spent his £500,000!  Just like that.

Sure enough, the next day he called me to say he had made a mistake. I had to deliver the bad news that he had already committed to buying these properties and if he was to back out he would lose his deposits, totalling approximately £50,000.

He had a very expensive lesson to learn. You might be surprised to hear this, but it is not an uncommon occurrence. Auctions are public - anyone can attend and bid for the properties.

If you want to take the risk and bid blind for a property you know little or nothing about, I can’t stop you. But, if I could give one piece of advice, it would be to do your homework first and take advantage of all the help and advice on offer.

Because as my mate, Malcolm, would say; “you’re not buying a box of bananas”.

Edward Mellor’s next auction will take place in Manchester on Wednesday 8th June, but if you are interested in any of the lots available, make sure you conduct all necessary due diligence before bidding.  

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