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Buying at Auction in a Sellers Market

Piotr Rusinek, auction specialist, comments

Buying at auction can be difficult in any market but it’s even more difficult in the seller’s market that we are experiencing right now. Buyers seem to compete like crazy for a somewhat limited amount of stock. Currently we are experiencing limited amounts of stock, increased liquidity with all of the money pumped into the economy and rising prices of many asset classes, especially many residential and commercial property types. How does one buy at auction in such a market?

Most importantly, your decision to buy should be based entirely on numbers you came up with in advance of bidding. Don’t become a motivated buyer who is driven by emotions. Instead be a sophisticated buyer who sticks to the strategy created in advance of the auction. Or buy post-auction when you know the competition is next to none.

Here are some steps to follow to do deals in auctions in such times.

Avoid vanilla auction lots
If the lot you are looking at is a simple vacant house or a flat in need of modernisation, the chances of getting it will be next to none. It’s worthwhile trying but do not spend too much time and resources on due diligence hoping you will be the highest bidder. Vanilla lots like this will be very likely pursued by end users who will place an emotional value on buying this particular property. And when emotions are in play, your spreadsheets and numbers have little chance of winning the battle.

What are your strengths and assets?
There are two parts to being able to be the highest bidder. One is your ability to add value to the property at the lowest cost. And the second one is your vision for the property. Let’s focus on the ability to add value and your strengths.

The lots that you need to be looking for are those where your strengths can be best utilised. An extreme example could be a planning consultant who probably will be best positioned to bid on a lot that has planning problems that need solving.

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