In the recent months, we’ve noticed an increase in the number of properties being traded between auctions by professional traders. In our weekly Auction Buyers Club calls, we often discuss the different strategies and techniques that traders use to buy properties from one auction and sell them at another. In this article, I will explain a few of the strategies that help traders achieve good results.
To begin with, buying from a poorly marketed auction or an auction that is not appropriate for a given property, can be a smart strategy for traders. By doing so, they may be able to purchase the property at a lower price than it would have fetched at a more competitive auction. They can then turn around and sell it at a more appropriate auction for a higher price. Usually that means buying the property in the local auction and then selling it in the national auction.
Another strategy is to purchase a property that is missing key documents, such as planning permission or building regulations approval, and then get those documents sorted before selling the property on. This can add value to the property and increase the sale price. Such circumstances often happen in the case of sale by receivers, probate, or in general sales where sellers do not have good personal knowledge of the property.
A good example is 23 Union Street, Market Rasen. The property was a two floor, freehold commercial building. Being sold by receivers it had a bit of a messy legal pack. But it sold for £44,250 off a £30,000 guide price. The new owner cleared the property, presented it as a vacant lot (it was let on paper while receivers were selling it but in fact the tenant was not occupying the property anymore).
The property was relisted in the next month’s auction with another national auctioneer with a guide price of £20,000 and it sold for £49,000. Given that there is no SDLT for commercial properties under £150,000, this had relatively low frictional costs. And additional costs of £6,000 were also added to the special conditions so the trade generated a decent profit.
