The below interview with Director Jesal Patel was published in the Autumn '16 edition of The Estates Gazette’s Property Auction Buyers’ Guide and is about advice for anyone looking to buy property at auction.
Inexperience at auction can result in busted budgets. Property experts share their tips for first-time developers and landlords attending ballrooms looking to avoid missteps:
Jesal Patel has been actively buying in the auction room for 12 years but has been attending auctions as an observer for much longer with his father, who founded the company around 30 years ago. They invest as principals and for clients and have bought and sold £22.5m of property at auction so far this year.
Our key message to investors is that you need to understand what you want, why you are buying and what your risk appetite is. Once auction catalogues come out, take your time. Make sure there are not many vacant units in the area you are considering buying in.
Get your lawyer to look at the legal documents and get your financing in order and your budget in place. You do not want to go to auction and then have to find finance afterwards. A lot of people do not have finance in place and then have to take bridging finance.
Have your purchasing entity ready – decide if you are going to buy in your name or in a company name, because on the day you will need to sign the documents in that name. Critically, read the addendum to check for any material changes affecting the property you are interested in. A lot of people do not.
We buy a lot blind and 99% of the properties do not have issues but occasionally something crops up. We bought a property recently at Gerrards Cross in Buckinghamshire that did not sell at auction and we found some issues with the lease. Our lawyer was able to work with the vendor’s lawyer to rectify the issue so it all worked out.
You can get the odd bargain here or there because the guide prices are set low, but generally the final sale price goes well beyond the guide price. Overpaying is a big problem. Some people have a vested interest in a property because they have committed to funds they have made in due diligence and decide to go for it anyway. Even if they have concerns, because they have already spent £4,000.
On the selling side, you can get misrepresentations of properties. We recently had to go to court to get our deposit back because something we bought was not as it had been sold. On the flip-side, we recently bought a parade of shops and there was an extra 5,000 sq ft that had not been documented. That was a bonus.
The original article featured 5 other property professionals. To read it please click here.