How we did the impossible: Buying a receivership property pre-auction

Now, I always stress the importance of industry knowledge and the ability to think outside the box. Well, today I’m going to recount a story that underscores just how critical those two factors can be. This one’s about a seemingly impossible feat we pulled off at Auction Buyers Club, and I think it’ll both educate and inspire.

Here’s the thing: It’s virtually unheard of to purchase a receivership property before it goes to auction. Why? Because receivers have a strict duty to ensure they obtain the best possible price for a property. Auctions are viewed as the open market mechanism to establish this price. Essentially, they’re playing it safe to avoid being legally pursued later. But what if we managed to do the unthinkable?

Picture this: I stumbled upon a property in an auction catalogue close to my childhood home. My intuition and a good old Google search led me to a golden discovery – an adjacent house for sale, that had planning permission for both properties to be converted into seven flats. A developer’s dream if they could get both. But Strettons, the auction house, were only auctioning one.

Then, like a scene from a movie, Kimberly Rothman from Auction Buyers Club reached out. She already had her eyes set on both properties and was looking to secure them before auction day.

Now, given the strict rules around receivership sales and the tight timeline (just 7 days till auction!) This was a Herculean task.

Piotr and I set to work.

Diving deep, we managed to trace the owners on Facebook and discovered their Polish descent. Leveraging Piotr’s Polish roots, we were able to establish an initial connection, making our approach more genuine. Piotr emphasised how the value of both properties would skyrocket if sold together. She got it. The husband? Well, amidst the chaos of a pending divorce and the sting of foreclosure, he was harder to convince.

Given the couple had already demonstrated the intelligence to obtain the planning permission in the first place , we were confident the husband would ultimately come round. And he did.

With the couple on our side, we gave them a crash course on how to communicate the potential financial benefits to the Receivers. It was crucial to drive home the point that selling both properties to a developer was not just beneficial, but the most financially prudent decision.

And then, the looming challenge – the bank. Knowing the couple’s debt ranged between £20,000 to £30,000, we crafted a strategy: increase the on-paper sale price of the Receivership property by £50,000. This would cover both the debt and the receivership fees. It was a win-win: The bank and the Receivers would meet their fiduciary responsibilities, ensuring they had achieved the best value and shielding them from any future legal repercussions. This manoeuvre was instrumental in getting the bank’s nod.

Of course, it wasn’t just about the owners or the bank. Strettons, the auctioneers, played a crucial role. We worked tirelessly to build trust, ensuring they had everything they needed for a seamless transaction.

The final hurdle? Structuring the deal ensuring the synchronised acquisition of both estates before auction day.

To do this, we arranged an option agreement for the second property, granting Kimberly the right to purchase it contingent on her successful acquisition of the auction property. This agreement was woven into the exchange of contracts. (With special thanks to George Crofts, Kimberly’s solicitor, without whom it simply wouldn’t have been possible!)

And after some high-stakes negotiations and a bit of finesse, Kimberly closed the deal on both properties, for a total of £1.1m. A price she was very happy with.

So, what’s the takeaway here?

Even in a world dictated by strict rules and regulations, with the right knowledge, creative thinking, and a splash of audacity, you can bend those rules to your advantage.

Remember, every challenge is an opportunity in disguise. If you ever find yourself facing a brick wall, don’t hesitate to think outside the box, or better yet, redefine the box.

And if you’re ever in need of some out-of-the-box solutions or want to delve deep into the world of property auctions, trading, and investments, you know where to find us.

P.S. If you’d like to explore more creative auction manoeuvres like the ones in this story,  join us at our free Auction Masterclass: Unconventional Strategies, on Tuesday 26th September.