Is buying property at auction really as easy as the televisions shows like Homes Under the Hammer make it look? What did we find out?
Homes Under the Hammer makes it look easy
A cornerstone of daytime telly is Homes Under the Hammer. The show follows ordinary people who buy properties at an auction, refurbish them and then either sell them for a profit or let them out.
Since May 2003, 1.5 million people have enjoyed this format on BBC One weekday mornings and it’s doing a successful rerun round on other channels too. Rumour has it that it’s also available on Prime Video.
It is a really repetitive format, punctuated by bad puns, the same common sense advice and estate agents valuations and opinions.
They make it look so easy to find, buy and let a property, but is it really that easy?
What can we learn from the show?
Firstly, there is the common sense advice:
- read the legal pack
- look out for expensive things to fix
- know the area and comparable property purchase prices and average rents
Secondly, there is the auctions themselves. How do you find a property at auction? Where are these auction houses? How do you get the catalogues and bid (especially if you’re not able to be in the room in person)?
Thirdly, most estate agents have a low expectation of what can actually be done with a run down property on a small budget.
Fourthly, everyone on the show is an avid DIY-er, professional landlord or property company. At the very least they’ve got family in a trade. So “mates-rates” or free electrics, plastering, plumbing, brick laying, etc is on tap which skews their cost models.
Finally, percentage yields seem to be the best way to gauge the profitability of a property. However, they never explain how these yields are calculated. When I do a back-of-a-napkin rough estimates from the numbers they throw out I think I can figure it out but it seems to exclude fees and taxes.
So is it as easy as the TV show makes it look?
It’s certainly no harder than any other method of finding, renovating and letting property. The mechanisms for viewings are different when you buy at auction. The legal pack saves a lot of leg-work by your conveyancing solicitor so there is a cost saving to that.
This means that there is an extra fee payable to the seller to cover the cost of the legal pack. This is in addition to fee to the auction house for the sale, usually a percentage of the purchase price.
Overall, the costs are different but no more expensive than an ordinary purchase. Especially if you manage to snap up a property at significantly below market value with low refurbishment costs.