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A landlord’s guide to selling by auction

A property auction is a fast and efficient method for landlords to secure a buyer, making it an ideal option for those looking to re-evaluate their property portfolio and maximise income. The process of selling by auction is straightforward and smooth, though there are some caveats that landlords need to be aware of, especially when selling a tenanted property.

To help ensure that you’re well-equipped and prepared to sell by auction, we’ve compiled this guide that offers tips to landlords selling their assets and answers frequently asked questions about the process.

Why are landlords selling property by auction?

It is becoming increasingly common to see rental properties being sold via this method, even when looking at estate agent websites you are likely to see several tenanted homes up for sale by way of partnerships with auction houses. Whilst there are several reasons why a landlord may wish to sell up, there are a few clear reasons why auctions are growing in popularity within the property industry. 

Empty properties cost money

Properties that remain empty can quickly incur costs, including covering maintenance, ground rent, mortgage payments, and building insurance. In the rare case that a building is empty for an extended period of 2 years or more, landlords might also face charges from the local council which is known as a premium. With the open market subject to lengthy selling processes and the risk of a buyer pulling out, selling by auction is an attractive alternative as it can provide a quick sale and alleviate the worries of financial costs associated with empty rentals.

Easy sale of multiple properties

Experienced landlords may have multiple assets that they’re looking to sell, or might even wish to sell their entire portfolio. An auction provides an efficient way to exit the market or refine investments within a short time frame. In addition to this, rentals often perform well at auctions as they give other investors the chance to quickly build a robust and diversified portfolio.

At auction, you can list several properties at one time and have these sold within the same event. This means you could liquidate your entire portfolio in one day if you wish, making it easier to keep track of sales.

Targeted marketing strategy

Selling by auction has an added benefit that takes away many of the administrative and marketing tasks from the seller. There is an extensive marketing period that happens before the Auction Event to ensure that the property is reaching the right audiences. Not only does this increase interest in the property, thereby boosting your chances of securing a higher sale price, but it also means that there is less work involved for you to generate interest in your property. Furthermore, if an interested party decides to approach you with an offer before the auction, you can accept this offer and still complete the sale under auction conditions.

Are there fees for landlords selling by auction?

Landlords selling their properties or portfolios don’t incur any extra charges on top of the regular auction fees. Seller fees will change depending on the auction method chosen, but our team can offer tailored advice to ensure that sellers are aware of the fees associated with their chosen method of sale. Additionally, upon the successful sale of your property at auction, the auctioneer will also take a percentage as a commission. This will always be discussed before the event so that there are no hidden financial surprises down the line. You will also be able to set a minimum reserve price on your property, meaning that should bids fail to reach a price you’re willing to sell for, you will not be obligated to transfer ownership to the highest bidder.

It is important to bear in mind that sellers will still be responsible for paying the legal costs associated with the administration tasks required to sell their property. This means that you will need to pay solicitors to create a legal pack, as well as organise gas and electric safety certificates, and an up-to-date EPC rating if you don’t already have them. You should also note that you may be liable to pay capital gains tax. This is usually paid on properties sold that are not your main home, very large properties that are over 5,000 square metres, or if your property has previously been used for business purposes under your ownership. If you are unsure, you can contact your solicitor who will be able to advise on your specific circumstances. 

Selling a house with tenants

Some landlords prefer to sell with tenants in situ as this means that they’ll receive rent until the completion of the property sale, generating a constant stream of income until the day arrives. This is also an attractive option for other buyers, as they’ll be able to immediately generate a new income stream. As such, tenanted rentals usually perform extremely well when sold by auction. 

If you’re considering this option, we’ve highlighted a few important points to consider below, but we recommend reading our ‘tips for selling a tenanted property’ blog which covers these in more detail to ensure that the process goes as smoothly as possible for yourself and your current tenants. 

  • Communicate with your tenants – Communicate well and organise suitable times for pictures of the house to be taken and viewings to be arranged, abiding by the legislation outlining the rights of the tenants. This is especially important as auction sales happen quickly and these will need to be completed in a short time frame. 
  • Communicate with your buyer – This will include collating all of the important documents that you have collected since the start of the tenancy. Be prepared to answer any additional questions from the buyer such as payment history, payment schedules, or history of conflicts.
  • Check your contract –  It’s important to re-read what you’ve mutually signed to avoid any misunderstandings and consider instructing legal support. For example, if your contract has a ‘Right of First Refusal’ clause written into it, you won’t be able to go to auction without approaching the other involved parties first. The signed contract is legally binding, so the new landlord must abide by the terms unless the tenant agrees to their changes or the contract expires.

Should you wish for any further guidance before selling at auction, you can contact our team of experts with your queries or read our seller FAQ.

Selling a vacant property

Properties without a tenant are open to a wider range of buyers as those looking to purchase a home for themselves may also show interest. The process of creating a legal pack remains the same, but of course, you will not need to compile a list of rental agreements and payment schedules, nor communicate with the tenants if they have moved out, or will be moved out by the time your property goes to auction. However, you will need to account for any costs associated with vacant possession. If your tenants will be in the property during the marketing phase, you should make sure that they’re aware of any viewings or pictures that will be taken.

In some cases, a buyer may also wish to make an offer for your property before the auction commences. You can choose to accept this offer and complete the sale under auction conditions if you’re happy with the price, but this comes with the risk that you could achieve more through competitive bidding. As mentioned previously, you will have the option to set a reserve price at auction, so you’ll never be in a situation where you aren’t happy with the price you’ve sold for. 

Should I sell with or without tenants?

Whether you sell your property vacant or tenanted is entirely up to you, as there are benefits and considerations with each option. Which way you choose to sell depends on your personal circumstances and financial goals, but we’d also recommend that you assess the market. If the area your property is located is less focused on rental units, then selling a vacant property may yield more success. If the area has lots of potential for investment opportunities, then selling with tenants can generate a high sale price. Take a look at our blog on the best buy-to-let areas in the UK to begin your research.

Streamline your portfolio with SDL Property Auctions

If you’re a landlord looking to sell by auction, we offer an efficient and transparent service to help you quickly get a price that you’re happy with. To find out more about this process, we recommend downloading our detailed selling guide or contacting a member of our team for more information.