Avoid the Herd at Property Auctions — with Dominic Farrell
Summary
Most investors walk into a property auction looking for the same thing: a clean, uncomplicated lot with no obvious issues. The problem is, so does everyone else. When the herd chases the same property, competition destroys the margin, and the highest bidder is rarely the winner in any meaningful sense.
In Episode 2, Dominic Farrell, founder of Distressed Assets and author of Property Auctions: Repossessions, Bankruptcies and Bargain Properties (4th edition, 2026), explains the strategy that separates investors who consistently buy below market value from those who overpay and hit problems at refinancing.
The core principle: every problem on a lot reduces competition. Reduced competition means fewer bids. Fewer bids means a lower price. A lower price creates margin. Margin is where profit is made.
Two real deals illustrate this. A mentee six weeks into Dominic's programme secured a tenanted property significantly below market value because he was the only bidder, the rest of the room couldn't resolve a tenant paperwork issue.
Separately, a three-bedroom house on the unsold list was secured for £70,000. The comparable in the live room, a two-bedroom, sold for £110,000. The legal issue that scared every other buyer away was resolved in very quickly at no additional cost.
Knowledge is the only edge that matters at a property auction. This episode explains how to build it.
Property Auctions Podcast — Episode 2
Why Chasing the Easy Lots Will Cost You a Fortune
Why do some investors buy well below market value at property auctions, week after week, whilst others overpay for the very same lots?
They are all in the same room. Looking at the same catalogue. But the outcomes couldn't be more different.
I'm Dominic Farrell, author of Property Auctions: Repossessions, Bankruptcies and Bargain Properties, now in its fourth edition. Welcome to Episode 2.
SECTION 1 — The Herd: Who They Are and What They Cost You
Let me start with the herd.
Walk into any property auction room in this country, or log in online, and you will see the same thing happen, without fail. A lot comes up. It looks clean. Vacant possession. No obvious complications. A decent location. And immediately the bids stack up. The price climbs. And keeps climbing.
That is the herd in action.
The herd chases the easy lots. The straightforward, nothing-to-worry-about, everyone-can-see-the-appeal properties. And the moment everyone decides a lot is easy, it stops being a bargain. Competition destroys the margin. Sometimes the price goes well above market value. I see it every single week without exception.
What does that look like in practice? Let me give you a real example.
A few months ago I was with a group, looking at two properties. The first we had identified early, but we were too late for a pre-auction offer, so we went to the live room. Our maximum bid was £78,000. We didn't even get close to pressing the button. The price shot straight through £78,000 and kept going. It sold for £110,000.
A two-bedroom house. Needing work. I estimated around £5,000 to get it into a lettable condition. So whoever bought it was all-in at £115,000. They had got caught up in the competition, bid against each other into a frenzy, driven the price well beyond what the numbers support. When they come to refinance that property, they are going to have a very uncomfortable conversation.
That is what following the herd actually costs you. You do not just overpay. You create a problem you didn't see coming. And the problem isn't the property. The problem is the price you paid for it.
So how do you avoid it? You stop looking where everyone else is looking.
SECTION 2 — Where the Real Opportunities
The real opportunities in property auctions do not sit in plain sight.
They hide behind problems. Behind complications. Behind the things that make most people put down their paddle and walk away.
And that is precisely where you should be looking.
Here is the logic, and it is straightforward. Every problem that exists on a lot reduces competition. Fewer buyers means fewer bids. Fewer bids means a lower price. A lower price creates margin. And margin is where your profit lives.
Now, I am not talking about taking on structural disasters. If you are a builder with the skills, the labour and the time to deal with major structural work, those lots can work very well, and I do work with builders who operate exactly in that space. But for most property auction investors, you are looking for a different category of problem entirely.
You are looking for tenant issues, where there is a paperwork gap or a procedural problem the majority of buyers do not know how to resolve. You are looking for legal issues — title defects, restrictive covenants, freehold complications — the sort of thing that sends the herd running but takes a competent solicitor a matter of days to fix.
Short leases. These frighten people. They really should not, if you understand the extension process. Slightly complex refurbishments that are well within your budget and skill set. And unsold lots — which I will come to in a moment, because that is a strategy in itself.
What all of these problems have in common is that they are solvable. They are not catastrophic. They are simply unfamiliar to most people. And because they are unfamiliar, the herd avoids them.
Which means you can walk in, understand the problem, price in the solution, and buy at a price the herd would never accept.
That is your competitive advantage.
SECTION 3 — The Tenanted Property: A Real Deal from Last Week
Let me tell you about one of my mentees. He has been on my programme for just six weeks.
Last week, he was successful at auction. The property was in a good location, in excellent condition, and it was tenanted. On paper, that combination should have attracted strong interest. But it didn't. Because most of the room couldn't work out what to do with it.
The issue was paperwork. Specifically, a gap in the tenancy documentation.
Here is why that matters. When you buy a tenanted property at auction, you are taking on a legal relationship with a tenant you have never met. You need a properly executed tenancy agreement, a protected deposit, served prescribed information, and all the required notices in order. Because if that tenant stops paying rent, or if circumstances change down the line, you will need that paperwork to enforce your legal rights. Without it, you have a business risk that most buyers simply do not know how to manage.
So they walked. Every single one of them.
My mentee understood the issue. We had worked through this exact type of scenario together on the programme. He knew precisely what the risk was, what the resolution looked like, and what it would cost. As a result, he was the only person bidding on an outstanding property in a strong location.
He secured it significantly below market value.
The tenant, incidentally, is excellent. Good payer, no issues whatsoever. The problem was entirely administrative. Once he had the keys, it cost nothing extra to sort out.
That is the difference between knowledge and ignorance at a property auction. Ignorance walks past a bargain because it looks complicated. Knowledge walks in and buys it. I have a lettings and property management business, so these situations are familiar territory for me. That experience is exactly what I pass on to people I work with. You do not need to reinvent the wheel. You just need to know what the wheel looks like.
SECTION 4 — The Unsold List: The Strategy Most Investors Never Use
Let me come back to that second property, because this is a strategy I use consistently and teach to everyone I work with.
The unsold list.
When a property fails to sell at live auction, most investors assume something is fundamentally wrong with it. Sometimes that is true. But very often the reason it didn't sell is circumstantial. A thin room on the day. A minor legal point in the pack that created uncertainty. Whatever the cause, the lot went unsold. And here is what that means for the seller.
They have been through a significant process. They signed the forms, submitted ID, signed off the particulars, sat through a marketing period of three to four weeks, and then watched their lot pass in the auction room with no result. That is a psychologically heavy position to be in. They may have already mentally allocated the proceeds. They may need to fund a purchase, settle a debt, or simply move on. A seller who has just failed to sell at auction is often a motivated seller. And a motivated seller is where you find the best deals.
Back to the second property on our list was on the unsold list. It had a legal issue in the pack. The kind of ambiguity that creates hesitation and sends the herd elsewhere. But we read the pack properly. We understood the issue. We made our offer. We secured a three-bedroom house for £70,000.
Compare that to the two-bedroom house that sold in the room for £110,000. Our property was larger, £40,000 cheaper, and it attracted a free energy efficiency grant that doesn't need to be repaid. The legal issue that put everyone else off? Sorted in under five minutes. No additional cost.
That is what reading the legal pack properly, understanding what you are looking at, and knowing when a problem is a problem versus when a problem is just noise — that is what it is worth.
So let me bring it back to where we started.
Why do some investors do well at auctions whilst others lose money on the very same lots? Knowledge. That is the only answer. The herd chases the easy lots and overpays for them. They walk away from problem properties because those properties look complicated. But complicated is not the same as dangerous. Most of the complications you will encounter at property auctions are entirely solvable — if you know what you are looking at.
Avoid the herd. Seek out solvable problems. Read the legal pack. Understand the numbers. And buy where no one else is willing to go.
I'm Dominic Farrell. My book — Property Auctions: Repossessions, Bankruptcies and Bargain Properties, fourth edition — is on Amazon. Search property auctions and it will come up number one.
Dominic Farrell is the founder of Distressed Assets and the author of Property Auctions: Repossessions, Bankruptcies and Bargain Properties, the UK's number one bestselling book on property auctions, now in its fourth edition (2026). He runs a property auctions mentorship programme and courses available in London and live online.
dominic@distressedassets.co.uk www.distressedassets.co.uk Available on Amazon
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Have a deal you'd like Dominic to look at, or a topic you'd like covered in a future episode? Get in touch.
Property Auctions Glossary - Definitions by Dominic Farrell, author of Property Auctions: Repossessions, Bankruptcies and Bargain Properties (4th edition, 2026)
Below Market Value (BMV)
A purchase price that is materially lower than what a property would achieve on the open market in a standard estate agency sale. At property auctions, below market value purchases are most commonly achieved on problem lots — properties carrying legal, tenancy or structural issues that reduce competition and suppress the bidding. Below market value is not a lucky outcome. It is the direct result of buying where other investors are unwilling or unable to go.
Bridging Finance
Short-term secured lending used to complete an auction purchase quickly, typically before longer-term finance such as a buy-to-let mortgage is arranged. Auction completion deadlines are usually 28 days from the fall of the hammer. Bridging finance exists specifically to meet that requirement. Interest is charged monthly rather than annually, so speed of exit — refinancing onto a standard mortgage or selling the property — is critical to keeping costs under control.
Completion Deadline
The contractual date by which the buyer must pay the balance of the purchase price and take legal ownership of the property. At most UK property auctions, the standard completion period is 28 days from exchange, which occurs the moment the hammer falls. Missing the completion deadline exposes the buyer to financial penalties and potential loss of the deposit. It is one of the primary reasons auction buyers arrange bridging finance in advance rather than relying on standard mortgage timelines.
Deposit Protection
The legal requirement for a landlord to place a tenant's deposit into one of three government-approved tenancy deposit schemes within 30 days of receiving it, and to serve the tenant with the prescribed information confirming this. Failure to protect the deposit correctly can render a tenancy legally defective and prevent a landlord from serving a valid notice to recover possession. At auction, a tenanted property with unprotected or incorrectly protected deposits is a common source of uncertainty — and a common reason the herd walks away.
Energy Efficiency Grant
Government-funded financial support available to landlords and homeowners to improve a property's energy performance rating. Certain grants do not need to be repaid. When buying a property at auction, eligibility for a non-repayable energy efficiency grant effectively reduces the true acquisition cost and can significantly improve the investment return — a factor most auction buyers fail to investigate before bidding.
Exchange of Contracts
At a property auction, exchange of contracts occurs the moment the hammer falls. Unlike a private treaty sale — where exchange can take weeks or months — the auction buyer is legally committed to the purchase immediately. There is no cooling-off period, no subject to survey clause, and no opportunity to renegotiate. This is why due diligence must be completed before bidding, not after.
Freehold
Outright ownership of a property and the land on which it sits, with no time limit attached to that ownership. Freehold is the most straightforward form of property ownership. Complications arise when a freehold title has defects — boundary disputes, missing documentation, or shared freehold arrangements — that are not immediately obvious to buyers who have not read the legal pack carefully. These complications deter the herd and, for a prepared investor, create buying opportunity.
The Herd
A term used by Dominic Farrell to describe the majority of auction buyers who congregate around the same lots — typically clean, vacant, uncomplicated properties with no obvious issues. The herd treats simplicity as a signal of quality. In practice, when every buyer in the room is competing for the same lot, the price is driven above market value and the margin disappears. Avoiding the herd is not contrarian for its own sake. It is the discipline of buying where competition is lowest and opportunity is greatest.
Legal Pack
The bundle of legal documents prepared by the seller's solicitor and made available to prospective buyers before an auction. A legal pack typically contains the title register, title plan, special conditions of sale, searches, tenancy agreements if applicable, and any other documentation relevant to the legal ownership and condition of the property. Reading the legal pack in full — and understanding what it contains — is the single most important piece of due diligence an auction buyer can do. Most buyers do not read it properly. That is where the opportunity lies.
Leasehold
A form of property ownership in which the buyer purchases the right to occupy a property for a fixed number of years under the terms of a lease, rather than owning the property and land outright. The underlying freehold remains with a separate party. Leasehold properties with short leases — typically under 80 years — are harder to mortgage, more expensive to extend, and less attractive to many buyers. At auction, short lease properties regularly sell at significant discounts. For an investor who understands the lease extension process, that discount creates margin.
Lease Extension
The legal process by which a leaseholder increases the remaining term on their lease, either by negotiation with the freeholder or by exercising their statutory right under the Leasehold Reform, Housing and Urban Development Act 1993. For leases below 80 years, the cost of extension rises sharply due to the addition of marriage value. Understanding the lease extension process — and the cost — allows an investor to price a short-lease lot accurately and bid accordingly, whilst the rest of the room simply avoids it.
Lot
An individual property listed for sale within an auction catalogue. Each lot is assigned a number, accompanied by a description, a guide price, and a legal pack. Not all lots sell at the live auction. Those that do not sell become unsold lots, available for negotiation in the post-auction period.
Margin
The difference between the total cost of acquiring and preparing a property — purchase price, legal fees, refurbishment, finance costs — and its open market value once those works are complete. Margin is not created by negotiating hard. It is created by buying problem properties at prices the herd will not pay, resolving the problem, and realising the underlying value. Without margin, there is no viable return on investment and no buffer against the unexpected.
Market Value
The price a property would be expected to achieve in an open market sale, between a willing buyer and a willing seller, with a reasonable period for marketing and neither party acting under compulsion. Market value is the benchmark against which auction performance should always be measured. A property sold at auction above its market value is not a bargain for the buyer. It is a problem deferred.
Maximum Bid
The absolute highest price an investor is prepared to pay for a specific lot, calculated in advance by working backwards from the desired return. The maximum bid accounts for purchase price, refurbishment costs, finance costs, legal fees, and the required profit margin or yield. It is set before bidding begins and must not be revised upward in the heat of the auction room. Abandoning a maximum bid is one of the most common — and most expensive — mistakes made by inexperienced auction buyers.
Motivated Seller
A seller whose circumstances make a swift, certain sale more important than achieving the highest possible price. Common motivations include financial pressure, probate, divorce, debt, or the need to fund a linked purchase. A vendor whose property has failed to sell at live auction is frequently in a motivated position — they have invested time and cost in the process and have nothing to show for it. That motivation is leverage for a prepared buyer.
Pre-Auction Offer
An offer made to the seller before the live auction date, typically through the auction house. A successful pre-auction offer results in an immediate exchange of contracts on the same legally binding terms as an auction sale. Pre-auction offers are most effective when made on lots the buyer has researched thoroughly and where there is reason to believe the live auction will attract strong competition. The window for pre-auction offers is usually limited to the marketing period prior to the auction date.
Prescribed Information
The documentation a landlord is legally required to serve on a tenant within 30 days of receiving their deposit, confirming which tenancy deposit scheme the deposit is held in and setting out the tenant's rights in relation to it. Failure to serve prescribed information correctly is one of the most common tenancy compliance errors. It does not automatically make a tenancy invalid, but it limits the landlord's ability to serve certain notices and creates legal exposure. At auction, the absence of prescribed information in a tenancy file is a flag that deters many buyers and creates opportunity for those who know how to address it.
Refinancing
The process of replacing short-term purchase finance — typically bridging — with a longer-term mortgage product once a property is in a lettable or saleable condition. Refinancing is the mechanism by which investors release equity from a completed deal and recycle capital into the next acquisition. Where a buyer has significantly overpaid at auction, refinancing is where the problem becomes visible: the lender's valuation will not support the loan required, leaving the investor unable to exit the bridging facility without injecting further cash.
Restrictive Covenant
A legally binding obligation attached to a property's title that restricts what the owner can do with it. Common examples include prohibitions on commercial use, restrictions on further development, or limitations on the type of alterations permitted. Restrictive covenants can be historic and unenforceable, or current and material. Most auction buyers treat them as a reason to avoid a lot. A solicitor experienced in property auction work can usually assess the risk quickly and advise on whether indemnity insurance is appropriate — turning what appears to be an obstacle into a straightforward resolution.
Title Defect
An irregularity or problem within the legal title to a property that affects the buyer's ability to obtain a clean, marketable title on purchase. Title defects include gaps in the ownership history, missing documentation, boundary discrepancies, or errors in the land registry record. A property with a title defect will often deter conventional buyers and lenders. For an auction investor working with an experienced solicitor, many title defects are resolvable through indemnity insurance or corrective registration — at a cost that, when priced in, still leaves a viable margin.
Unsold Lot
A property that was offered for sale at a live auction but failed to meet its reserve price and was withdrawn unsold. Unsold lots remain available for purchase in the post-auction period, usually on the same contractual terms as the auction itself. Sellers of unsold lots are frequently in a more motivated position than they were before the auction — they have been through a lengthy process, the result has been public, and the psychological pressure to complete a sale is heightened. For a buyer who has already reviewed the legal pack, an unsold lot is often the best opportunity in the entire catalogue.
Vacant Possession
A property offered for sale with no sitting tenants or occupants, available for the buyer to occupy or let immediately upon completion. Vacant possession properties are the most straightforward auction lots to buy and, as a result, attract the most competition. The absence of complications is priced in. A vacant possession lot in a good location with no obvious issues will reliably attract the herd, and the herd will reliably drive the price beyond the point at which a sensible return is achievable.