An interesting segment to look at when digging for deals is the unsold section of the auctions. This is where a property has been through the auction process and has not sold. Often auctioneers, especially so the bigger ones, prior to taking a property on make sure it’s at a price where they will achieve a sale; as to have properties which are unreasonably priced means they will end up being unsold. And this is not good PR for the next auction.
It’s often the sales figures for the last auction which will drive the business for the next one. Therefore, the point being if the property remains unsold, even after it has been priced properly and been through the auction process there’s a strong chance there is a deal to be done. The above serves to be a filter. There are those properties which are on the market because they have to be sold, it is no longer a choice. The obvious being repossessions; the not so obvious is councils and housing associations who need to convert some assets into cash prior to a certain accounting date. I was offered a freehold building in Kings Cross, many moons ago, for £350K for this very reason.
The other obvious question, the sceptic would ask, is well if it’s worth so much more, then why didn’t it sell?
There are probably numerous answers to this; I only have a few suggestions. One is, it has been misdescribed. I have seen what looked like and therefore probably was a straight square building, where the ground floor consisted of say 1,000 sq. ft., but as you went up the square foot diminished – substantially. Probably due to a combination of the way Net Internal Area is calculated and bad measurement. Another is, when the property is in a certain geographic location, say in Middlesborough, but is put in a London auction, rather than the local one. This is less of an issue now as the online auction platform serves to level the field, but still has an impact.
When a property has been unsold, but needs to be sold, the door is open to put a cheeky offer in, especially in the current environment of economic and interest rate uncertainty. This strategy does not work so well in central London, but more so on the outskirts, and of course even more so completely outside of London; areas which have been receiving a lot of attention from investors, due to the poor yields and stagnation of the London market.
We have a couple of properties which we are circling currently with a view to putting offers in shortly. These will be looking for investment.