Buying property at auction?
Do this before the hammer falls.

Deji Nehan00:00

I always say, work out your maximum bid and try to stick to that. If you’re going to auction, write it down, share it with somebody else and let them keep you accountable. Your maximum bid should be, in simple terms, your walk-away figure.

Alastair Hoyne00:17

At auction, the hammer can fall before you’ve properly understood the legal pack, the valuation, the finance or even how much cash you’re actually going to need. So how do you make sure winning the lot doesn’t become the moment you discover you’ve bought a problem?

In this conversation with auction specialist Deji Nehan, we’re going to look at what a buyer should have established before bidding, how to think about finance and maximum price, and how to recognise when the right decision is actually to walk away.

Welcome to The Property Escalator. I’m Alastair Hoyne, founder and CEO of Finanze Group and author of The Finanze Framework: Property Strategy & Finance Success. I wrote the book around a simple idea: property decisions work better when strategy, finance, legal, tax, valuation, delivery and exit are treated as one connected system. The Property Escalator takes that thinking into real conversations with people operating at different points in the property journey.

Today we’re talking auctions with Deji Nehan. Auctions are particularly interesting because the timetable compresses, but the consequences of getting the decision wrong don’t. Deji, thanks for joining me.

Deji Nehan01:27

Thank you very much, Alastair. Lovely to be here.

Alastair Hoyne01:32

I’ve just finished talking to you and being interviewed by you on your podcast, so it only made sense to bring on the number-one expert for auctions to come and talk with me, especially seeing as I cover it in the book. We’ll be pointing anyone who asks about auctions your way, because they are a tricky animal, aren’t they?

Deji Nehan01:50

Definitely. The recording we did has gone very well. It’s long enough that we have to put it into two. A lot of nuggets in there, so thank you for coming over.

Alastair Hoyne02:06

I think that’s the problem: I tend to get quite excited about subjects, and I want to make sure your listeners and my listeners are getting everything they possibly can out of it. Sometimes I speed up, get overly excited and start gesticulating like a mad Italian. Although I did actually grow up in Italy, so that covers it a bit. Let’s get started.

Alastair Hoyne02:28

Deji, what separates a properly prepared auction buyer from somebody who is essentially hoping everything’s just going to work out after that hammer falls?

Deji Nehan02:38

I’ve heard that a lot: things are just going to work out. I always tell people, don’t ever assume that. The difference is how prepared you are. In property generally, preparation is key, because you can lose your money, your time and a lot more. With auctions specifically, as you mentioned, it’s compressed time. There is a higher risk of losing much more.

Unlike the traditional buying process, where you view, put in an offer and follow the cycle, auction is completely different. You might have an opportunity to view, but a lot of people are not prepared. There are resources to help you. The first big tip I give anybody is to go to an auction first, just to test-drive it without the intention to buy. That’s your best preparation.

Alastair Hoyne03:48

That’s pretty critical, and really the key starting point. The auction itself should be the execution point of a strategy you’ve already thought through, rather than the moment you start working out whether it makes sense.

You and I have spoken about this at length. You can go to an auction and get carried away by the excitement. You start thinking, ‘He must know something I don’t. Maybe I’m selling myself short and should put in a higher bid.’ We’ll talk about that during this conversation. It becomes a bit of putting your wallet on the table and seeing who’s big enough.

Deji Nehan04:40

People run with emotion. That could result from thinking they’ve seen a bargain, because everybody assumes everything going to auction is a bargain. It might look like a bargain, but there is a lot more people don’t consider.

Because somebody else is bidding at a higher price, they may have a completely different scenario to you. Understand why you are bidding, what is in it for you and what the end game is. If you don’t have an end game in mind, you’re already losing out.

Don’t go to auction with emotion. Nowadays you don’t have to be in a physical room: it might be online, by phone or proxy. All of that is still an auction. Take your emotions out of it and let the numbers work. You are the finance person: if the finance doesn’t stack up, you don’t lend on it. If you’re considering a project, make sure the finance works, not just the optimistic value or what you think is possible, but the reality of it.

Alastair Hoyne06:11

I remember a long-time client telling us they were going to buy a property at auction. They estimated it was worth, let’s say, £300,000. They sent me the link; it was being auctioned by Savills.

We had offered the best terms we could. Had they got it at their ideal price, we would have been funding 90% to 100% net of the purchase price, save for legal costs, valuation fees, stamp duty and so on. I decided to watch because I hadn’t seen an auction in a long time, since being in a physical room.

It was very different. I’d always thought of auctions as rigid structures: the count gets to three, you’re stopped out and that’s it. I don’t know whether this was unusual, but the price went above what we thought it would be worth with the refurbishment, while still in its dilapidated condition. That was the first surprise.

The second was that the count got to three, then he checked his headphone and said, ‘We’ve just had a last-minute telephone order, so I’m going to open it up again.’ That happened three or four times. It felt like it was going beyond the rules: ‘One, two, three, it’s sold. Oh, wait, we’ve got another call; it’s gone up again.’

I thought that was unfair to the person who thought they’d secured it after the hammer went down. They will do whatever they can to bid up the price if they can. I suppose there’s also the concern about false bidders trying to inflate the price, as I used to find on eBay in my twenties. Is that something you’ve experienced, and another way we can protect borrowers and your clients from mistakes at auction?

Deji Nehan08:26

That happens a lot. It’s one reason I tell people to experience an auction house, or log into an online one. It’s not just about fake bids. Some auctioneers are very experienced and can pick any corner of the room to flag that there’s still something ongoing, but you don’t see everything in the room.

One thing I tell people is to sit at the back, so at least you can see what everybody else is doing. That’s the first strategy for a physical auction. You start to understand whether bids are genuine. A lot of reputable auctioneers don’t do that, but there are still some out there who do.

There are three things to think about. There’s you versus everybody else. The property has come to auction to drive competition, and when emotion is involved people go out of scope. As in your example, they start bidding above the finished value before considering the cost of getting there. Afterwards, reality sets in.

There are the auctioneers trying to get the best they can, because the more they sell for, the more their commission. There are also traders bringing property to auction. Not everything is coming from the original owners; somebody may have bought it to flip without doing the work.

Alastair Hoyne10:45

Like an arbitrage deal?

Deji Nehan10:48

Exactly. They bring it with the intention of getting more money. Consider those mindsets. The starting price is not necessarily the end value, so be prepared and know where to stop. Experience, or somebody who has been to auctions and can guide you, helps. Don’t go with emotion. Go with somebody who can pin you down and say, ‘No more.’ That can save you from a mistake.

Alastair Hoyne11:31

If there’s no physical property auction nearby, you could attend a car auction. They’re similar, with traders trying to buy cheaply, fix things up and put them on a forecourt. If you really want not to understand a single thing being said, go to a cattle, pig or sheep auction. There are loads where I live in the countryside. I can’t understand a word they’re saying, but they’re very fast-paced.

Deji Nehan12:01

Just to add to that, go on YouTube and see live auction houses and the fastest auctioneers. There’s a lot you can pick up without doing too much initially.

Alastair Hoyne12:19

Definitely. It’s in films and movies as well. That was interesting about sitting at the front: the auctioneer is looking over your shoulder and you don’t know whether somebody behind you is bidding. Whatever you do, don’t accidentally scratch your head by putting your hand in the air. Sit on your hands!

Alastair Hoyne12:40

Before somebody bids, what should they already know about the property, the legal pack, the finance, the cash requirement and the completion timetable?

Deji Nehan12:49

The most important thing is the legal pack. I’m not a solicitor, and you don’t have to be a solicitor to start dissecting one. Understand that what governs the property you’re buying is in the legal pack. There could also be a last-minute addendum, which we’ll talk about, because people miss that.

The legal pack gives details of the property and who is selling: an individual, a company, a receivership or administrator. That builds a story about why it’s being sold. You’ll see whether it’s leasehold or freehold and get information to make a decision.

Look at the special conditions. Is there anything instrumental to the transaction that you need to know, such as title issues or a short lease? The savvy investor doesn’t just look at a legal pack as a problem. They ask, ‘What can I do with this? What solution is there?’

That’s why I like the solutions at Finanze Capital. You have prepared products focused on specific problems. If you identify that problem at auction, you have funders who can help you think about it. It doesn’t mean everything in the pack is there to make you afraid. It could be an opportunity to turn something around.

The problem is when you bid without knowing what’s in it or which conditions affect your plan. You will have priced it against a different strategy. If something has a problem, what price can you pay that justifies fixing it and making a profit? If it isn’t for you, or you don’t know how to fix a lease extension, at least that gives you a reason to stop rather than lose your money.

Deji Nehan16:04

When you select one or two auction lots, I would always advise speaking to a conveyancer who understands auction so they can review your legal pack. It can be an expensive process, but now there are also AI tools.

On auction360.co.uk we have tools we’re deploying to help with the initial stage of identifying potential issues. It isn’t your final stop, but it gives you an idea. With tools such as ChatGPT or Perplexity, loading a document can give you a draft of what to be concerned about. That should be a starting point before surveys and other work. Pick out the issues so your finance person or broker can help identify which lenders might fund it.

Alastair Hoyne17:29

Auction360.co.uk, everybody: go on there with your legal packs and see what it says. There’s also a red-flag report that a lot of solicitors produce, scanning the documents and telling you whether anything serious stands out.

The legal pack is there to be transparent because you are going to be accepting risks, provisions and exceptions when you win. Take advantage of that information to make sure you’re getting a bargain you can renovate, flip or refinance, rather than discovering a problem after you get in. I gave the example of a former cannabis farm, insurance problems and damaged foundations.

Look at the legal pack as your best friend, alongside any funding you need. That’s why taking advice from somebody like Deji matters. If you skip it because you assume everything is fine, it’s online and a reputable name is selling it, that could trip you up.

It’s easy to focus on the guide price and the property, particularly when you know the region and are getting excited about tenants. But the real transaction is everything around it: the legals, funding, construction risk and insurance. It’s like buying a stock. A good brand name, or the appearance of a property, doesn’t answer whether it will perform, grow profits or pay a dividend.

Alastair Hoyne19:36

How much can realistically be done with lenders and valuers before the auction? We’ll exclude my brilliant lending division for a moment and talk about your broader experience. What remains uncertain even when somebody has prepared properly?

Deji Nehan19:57

You’ve looked at the legal pack and your broker understands the negatives. If you can deal with the negatives, that helps. It needs a broker who understands the full process. More importantly, when they go to a lender, ask for a credit-backed pre-approval.

People say get a decision in principle, but it isn’t as simple as that. You can get a DIP and it won’t be honoured because something comes out. Do the due diligence upfront. The broker pieces together what matters and takes it to the lender for a credit-backed assessment, so you are more likely to be funded.

Make everything transparent to the broker, lender and solicitors so everybody is on board and can highlight what might stop funding. If you have a good relationship with BDMs, ask them to check with underwriters. Is there anything of concern? If something changes, will the plan, amount or facility change? Always check that first.

Deji Nehan22:14

One mistake is thinking that because it’s auction and bridging, the borrower’s position doesn’t matter. It does. A lender giving you funding at stage A wants to know you can come off the bridge at stage B.

If you have a CCJ or have been repossessed, you need to know there are lenders at stage B who will accept that situation. People, including brokers, can forget to check that and concentrate on getting the bridge done without thinking about the exit.

After the legal pack, one of the most important parts is your exit. You want to come into auction and short-term finance, but what is your exit, how much clarity can you get, and have you considered more than one route?

Lenders want to make money from lending without problems, and many BDMs look at what happens after the short term. A bridging lender isn’t trying to lend for five years. It’s short term, perhaps nine months, a year or 18 months. Think about the exit from the outset. Your broker relationship can help you establish that early.

Alastair Hoyne24:42

That’s critical. We discussed it when I was on your show. With my lending hat on, the exit is the first thing we think about. We open the property link and immediately ask, ‘What is this roughly worth, and how do we get our money back if the borrower doesn’t get to stage B: refinance, finish, refurbish or sell within the time they’ve said?’

Finding your exit should be an exercise you carry out with your broker at the same time as finding the bridging finance.

Alastair Hoyne25:21

The other useful point was getting a DIP, a decision in principle, which people may know from mortgages. In bridging, you’ll often see illustrations or quotes.

Deji kindly mentioned Finanze Capital. We have a process that suits auctions, although it’s how we handle all transactions. Assuming we’ve been given all the information we require, we fully underwrite a case ahead of valuation to establish whether we can deliver. The valuation result then dictates how much we lend. There’s a critical point about lenders, valuations and auctions that we’ll cover.

I have brilliant competitors and love other lenders in the market. But some BDMs have targets that aren’t entirely based on completed loans. They may be calls answered, emails sent or illustrations issued. An illustration can go out quickly without much thought, to capture a client.

You go to valuation, bid successfully, and then the underwriter looks at the case and says the client is outside criteria: age, adverse credit or a property the lender isn’t interested in. In a normal transaction you may have wasted money on a valuation and might be able to get it readdressed to another lender. That problem gets exponentially worse under auction conditions.

Once you’ve committed, paid your deposit and have a fixed number of days to complete, you have to perform. You might lose a deposit, but the seller could also issue a notice to complete and you need to find the money.

Good preparation reduces uncertainty; it doesn’t make finance unconditional. Even in our case, if something emerges that you haven’t disclosed, such as negative credit or mortgage arrears, offers can be withdrawn. You need to understand what can change after valuation, underwriting and legal work.

Have a safety net. If the lender reduces the loan, can you still progress? Can you raise against an existing asset, borrow for business purposes against your own home or find somebody with money available? It sounds mad, but I know people who have found private money through somebody down the pub.

Alastair Hoyne29:05

How should a buyer set their maximum bid when they’ve got SDLT to pay, which if they’re buying in a company is going to be 17%, they’ve got to estimate the works and finance, and the cash required, given a level of uncertainty? Is it like a development deal, working back to a residual value to work out where you start?

Deji Nehan29:36

Yes, it’s very similar. Don’t always put the price on the best-case scenario. People do the calculation, but use the best case. Let it be realistic, checked and potentially as negative as possible. If you expect the property to be worth £400,000, what if it’s worth £365,000 or £370,000? If there is still profit, that’s a good negative approach. Hitting £400,000 becomes a bonus.

One postcode can be completely different from the next street. People use a valuation from a more valuable street without understanding that two streets away is a different price point. That puts them on the wrong foot. What are local estate agents saying? What are the tools available saying? Local understanding helps piece it together. Start with a pessimistic end value and work backwards.

How much will refurbishment cost? That’s a loaded question: there can be delays, budget increases, weather or other things that don’t favour you. Plan contingency around time as well as cost. Work back from the end value and what it takes to get there.

Deji Nehan32:08

People miss the associated costs of buying at auction. You’ve talked about stamp duty, but there are auction fees, buyer’s fees and potentially the vendor’s legal costs.

Alastair Hoyne32:22

And those are itemised?

Deji Nehan32:24

Correct. People may have worked out stamp duty according to their status, but miss the auction fees. Working with the right broker can help you ask whether these things have been checked. They’re in the legal pack and special conditions, and need adding to the cost of your bid.

Think about buyer’s premiums, auctioneer or auction-house fees, and any other fees. Your broker should clarify arrangement, exit and broker fees on the finance illustration. There are also your solicitor’s fees. Work out everything possible.

It’s better to have it on paper even if you don’t yet have a figure. You can trick yourself into thinking you’ve covered everything while missing something essential. Use a template; we have templates we can share. Once you have covered the costs, calculate your maximum bid.

Work it out and stick to it. Write it down, share it with somebody else and let them keep you accountable. Your maximum bid should be your walk-away figure.

Alastair Hoyne34:45

It’s almost like break-even. If I don’t make any money, that sets an upper limit, and I come down from there to make incremental profits.

Deji Nehan34:55

Be ready to walk away as you come close to your figure. That’s very important.

Alastair Hoyne35:04

This is where discipline really matters. The maximum bid should come from the strategy and downside, not the atmosphere in the room. If the deal only works because you’ve increased the end value, reduced the works budget and assumed everything goes perfectly, you’ve probably stopped analysing the deal and started justifying the price.

Alastair Hoyne35:35

What should make a buyer walk away, even when a property looks like an absolute bargain or they’ve become emotionally committed to winning it?

Deji Nehan35:50

One of the most important things is the addendum. A lot of people miss it. Additional information can appear a week, a day or hours before the auction. If something comes up that you haven’t priced into your original plan, and you need to speak to your conveyancer or broker, be disciplined enough not to start bidding rather than rush.

We also have to be realistic: some people are buying a residential home, not an investment. There’s an emotional element. A homebuyer who wants a location has a different perspective from an investment professional looking at an asset.

The issue is whether you have priced the risk. Do you understand the risk, your profile and the cost of fixing it? If you can achieve the outcome within that, it may still be a good deal.

Second, finance is not guaranteed. Something can emerge at the end. You might win the bid and everything looks clean, but some purchases will not complete. The right lender and broker minimise some risks, but nobody can remove them completely. The responsibility still falls on you, because you are the one who bid. Your name is on the line.

Then ask whether you know enough about the area and, if refurbishment is needed, what that entails. It isn’t just the quote: can you manage the process and know what is realistically achievable?

If it isn’t something you’re experienced in, find somebody who is. People focus on borrowing funds, but you can borrow expertise. You’re borrowing the expertise of brokers and solicitors, so why not somebody experienced in refurbishment or the things you don’t know? Use that to shape your responsibility properly.

Deji Nehan40:02

Another discipline is understanding the strategy from the outset. If you know what you’re doing and the end point, it helps you decide how the whole process should work.

Take title splits and lease extensions, two of your products that I love. If you want a title split, you look for properties that allow that, perhaps multiple units on a freehold. Understanding the strategy helps you identify the specific things you need to check. Understand the negatives that would stop you achieving it.

Alastair Hoyne41:17

You have time ahead of an auction. They give you notice that something will be listed. It’s like an exam: you study so that when the moment comes you have enough knowledge to write the correct answer. Prepare, do your homework, study and revise. When you’re called into the room, online or in person, you’ve done your homework.

Those lessons aren’t just for auctions. They’re important in property generally: knowing your position and where your boundaries are.

Alastair Hoyne42:22

Title splits and lease extensions are interesting for auctions. The elephant in the room, especially with lenders and valuations, is the popular below-market-value strategy. We support it openly, but at auction you face a slightly different problem.

From our experience, if you get a valuer in before the auction, there’s an opportunity to assess market value. If you then buy at a discount, you have a below-market-value deal. If you don’t get the lender’s valuer in before the auction, the minute the gavel falls your auction price becomes your market value, because it has satisfied the RICS test of an open group of non-connected people pricing an asset. You’ve reset market value.

If your lender said it would lend 75% of market value, and valuation doesn’t take place before the auction, your loan can reduce to the price you bid and won it for. That’s our experience of how lenders lending on open market value treat it. Others lend on purchase price in the first place, so you would have needed a deposit anyway.

That’s a risk to be aware of. Has the valuer got in? Can I at least get an automated valuation model, an AVM, to give some sense of value?

Deji Nehan44:12

A very good point. With the compressed timeline, some lenders support the process with AVMs. Some can instruct a valuation within a short period. Looking at below-market-value strategies, a lender might do 90% of the purchase price versus 75% of market value. There are variations, but you need to establish the valuation.

Get things aligned and in the right order. A valuation may provide open market value, and figures under a 180-day or 90-day sale period. If an asset had to sell within that time, what might it achieve? We expect that could be discounted.

We’re looking to do a full session on valuation so people understand what comes out in the report and what each element means. Do your homework and understand the different facets. The valuation is important to what the lender can give you, so price that into your plan.

Alastair Hoyne46:25

A discount isn’t a strategy by itself. Something being cheap doesn’t necessarily mean the market has got it wrong. Sometimes it’s cheap for a very good reason.

Alastair Hoyne46:39

The other thing to warn people about is sourcers. There are very good sourcers who are properly accredited, with The Property Ombudsman or a property redress scheme, and their AML licence with the FCA. They act as an estate agent for all intents and purposes and do the job properly, including vetting their client’s source of wealth.

There are also people who haven’t gone through the appropriate process or created the compliance paperwork. You see a PDF of a brilliant ‘off-market’ deal that you then find on an auction site. Despite its condition, you’re told you can go straight to a buy-to-let mortgage without a bridge, so you’ll make a massive return.

Some are marketing auction properties as turnkey and ready for a mortgage. The sourcer gets paid and is gone. The broker then discovers the deal has been priced on cheap, well-geared mortgage finance that won’t work because the property needs refurbishment.

A mortgage can take months to arrange. Even a bridge without an AVM or dual-representation legal basis can take weeks. Somebody can find themselves three weeks into a four-week deadline without the money to buy, perhaps because a sourcer has been acting as if they were a broker. That’s one difficulty in the unregulated company business-borrowing market.

That brings us to Deji’s service. You have his book, you can call him and he may be able to support your refurbishment planning. He can also broker finance so you approach appropriate lenders. We’ve covered educational gems that will help people considering auctions. It might scare them off, but it isn’t something to be afraid of. It’s something to prepare for. How can you help with that preparation?

Deji Nehan49:26

Education is important in all situations. Some deal sourcers go to a one-day crash programme and then present themselves as professionals. Be wary: they may be starting a journey without understanding the full scope or consequences of leading somebody down the wrong path. Work with responsible professionals.

Understand the different people in the industry and where they sit. Some deals are fantastic and others less so, but you may still be able to work with them. The sourcer isn’t giving you the funds, and neither is the broker. Everything, including solicitors, needs to work in alignment. People talk about a power team in courses without actually making it available.

One gap we see at Auction360 is coordination. That is one reason I wrote Auction Demystified, to explain the full scope of what you need at auction. It’s available on Amazon, with a shorter version on our website.

Work with experienced lenders, brokers and solicitors who have been through the journey and can help you reach the end. Get educated, use tools and guides, and ask questions. We have a 28-day guide. That’s a generic name: some auctions are 14 days, and 28 days includes weekends. You may technically have about 20 working days.

Don’t assume your broker knows everything, your conveyancer has done everything or an AI check has given you everything. Be ready to ask questions. Educate yourself, work with the right professionals and use the available tools.

We’ve brought together what you need around auctions at Auction360. We have a panel of solicitors we trust and check whether they’re on the lender’s panel, whether there’s dual representation or single representation. If those terms are unfamiliar, we can find the information. You can’t know everything, but you can know enough to check.

When you bid and win at an auction, you have technically agreed to exchange. The responsibility is yours. People have lost deposits or walked away because an issue was bigger than they realised, often because the right things weren’t done at the outset.

Whatever stage you’re at, just starting, in the middle of a traumatic purchase or nearing the end, talk to somebody who can support you. We offer sessions, podcasts and support. If you have questions, reach out.

One good thing about lenders who understand the detail is their ability to model and structure a deal. I’ve seen that with Finanze Capital, and it’s something you or your broker can use. If you have a broker, introduce them and ask questions. There are products around title splits, lease extensions, below market value and other things. Clarity and transparency can help you get through to completion.

Buying property can be difficult. It looks fast-paced, but 28 days goes so quickly that you might need to take a holiday to deal with it. We understand that. Working with the right team makes it easier. If you have questions, we want to support you.

Alastair Hoyne55:50

Deji, thank you so much. We’ll share your contact details in the bio, comments and on screen. Auctions can be one of the most stressful transactions, but they don’t need to be. Talk to Deji in advance, read his book and get in touch early, before thinking about your pricing and offers. Let him help with the calculation, assess lending possibilities, identify lenders and arrange valuations.

Then on the day you can be confident, but with a fixed maximum target you won’t breach. There are auctions all the time and plenty of fish in the sea. If you miss one, there will be another. You don’t need to worry that you’re missing the next best thing.

The hammer shouldn’t be the point where you start asking whether the deal works. The legal position, finance, cash requirement, value and exit all need enough thought beforehand so that when you bid, you’re making a disciplined decision rather than taking a gamble and hoping everything falls into place afterwards. Thanks for joining me on The Property Escalator.

Deji Nehan57:18

Thank you very much, Alastair. I love what you’re doing.