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Spotting a Fake Bargain at Auction using AI

Spotting a Fake Bargain at Auction using AI

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Welcome back to the Property Auctions Podcast.I am Dominic Farrell, the author of the UK’s No1 bestselling book about property auctions, which is available on Amazon and other good book providers.This week I want to talk about something that catches out a lot of auction buyers, especially beginners, how to spot a fake bargain at auction.One of the biggest mistakes people make is confusing a low guide price with a bargain. They are not the same thing.A property can look cheap online, photograph well, be in decent condition, and still be completely overvalued. Equally, a property that does not look spectacular at first glance can be a genuine bargain if the numbers, seller motivation and timing are aligned.So in this episode I want to explain the difference between a real bargain and a fake bargain, using two examples from a very busy week we had last week.1. The Real Bargain: Secured Before Auction I was out viewing auction properties on most days with some of my mentees. Some had travelled from far afield, while others were local here in Liverpool. We saw a lot of stock, spoke to agents, reviewed legal packs and ran the numbers.Two properties stood out. One was a fantastic bargain. The other looked like it might be a bargain, but once we did the homework, the due diligence, it clearly was not.Let’s start with the real bargain.On Monday, we secured a property before it even got to auction. While we were viewing it, an auction house was also there, presumably with a view to providing a valuation for the owner. So this property was almost certainly heading towards auction. The auction house was assessing it, and the owner was clearly considering that route.But we struck first.We were not the only interested party. Other people had seen it, and other offers were being made. But we secured it, and it is an absolutely fantastic deal for one of my mentees. I have no doubt that if that property had gone to live auction, it would have sold significantly higher.So why were we successful?It was not because we offered a ridiculous amount more than everyone else. We were in and around the same level as other interested parties. The difference was reputation.If you build a reputation for completing on properties, if you have longevity in the market, and if agents know that when you make an offer you are serious, that matters. Remember, agents make their money when properties sell.They do not make their money when someone makes a big offer and then disappears. They do not make their money when a buyer ties a property up for two or three months, only for the sale to fall through. And if that happens, the agent may lose the instruction altogether, because the owner gets frustrated and decides to send the property to auction anyway.So from an agent’s point of view, certainty has value. A buyer who can actually complete is worth more than a buyer who merely talks a good game.That is an important lesson in auction property. Speed, certainty and reputation can turn you into the preferred buyer, even when your offer is similar to someone else’s.That first property was a real bargain because the price worked, the timing worked, and the seller had a reason to move before auction. We will probably never know exactly why they chose us, and not the auction route.2. The Fake Bargain: It Looked Good on the SurfaceNow compare that with the second property. This one is the fake bargain.We went to view it, and on the surface it looked very good. It was in very good condition. It was in a reasonable letting area. It looked like the kind of property that would appeal to many new and inexperienced investors.You could easily look at the photos, look at the guide price, and think, “That looks like a deal.” That is exactly where people get caught out. They make a decision with their eyes before they have done the work with the numbers.Clean kitchen. Decent bathroom. Good condition. Reasonable letting area. Low guide price. Therefore, it must be a bargain.But that is not how auction buying works. A property can be clean, tidy and lettable, and still be overpriced. It can look easy and still be a bad buy.And this one, without any shadow of a doubt, was not a bargain. Even at the guide price, it was overvalued.So how did we know? We knew because we ran the due diligence properly.3. How We Knew: Due Diligence and AIFor us, part of that process now involves using artificial intelligence, or AI. We use Claude, and we have trained it to produce the information we need from auction legal packs and property data. You can then cross reference the findings using other AI, such as ChatGPT and Gemini.I should be clear. AI does not replace a solicitor. It does not replace experience. And it certainly does not mean you stop thinking. But it is a fantastic tool for organising information quickly and highlighting the areas that need attention.Our process is structured. First, it tells us what documents are included in the auction pack. Then it ...
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