Buying Bankrupt stock

Rodney Hylton-Potts writes;

I am looking at auctions and websites selling assets from bankruptcies and insolvencies. Is there anything I should be aware of before bidding?

Although some properties are on the market with the aim of achieving a quick sale, you cannot always expect to land a bargain.

Start with a specialist agent or an aggregator website where it is easy to compare properties from bankruptcies and administrations. Speak to insolvency practitioners or agents involved with the property. They will provide information about the circumstances of the sale and give you an accurate indication of whether there is a deal to be done.

Unless you are able to buy the property in cash, speak to your bank or broker as soon as possible to get an indication of how much you will be able to borrow. Lenders will base their loan on what was paid for the asset as opposed to what it might be “worth”. Buyers who close a deal quickly often benefit from better prices and discounts. But do your research and due diligence before buying any type or size of property. If the business relies on passing trade, for example, you need to make sure that a poor location with minimal footfall was not the downfall of the previous owner.

Be realistic. Simply because a property is on the market after its owner ran into financial difficulties does not necessarily reflect poorly on the asset. Don’t expect to pay 10p in the Pound.