Sell a tenanted property at auction
Guidance for selling a tenanted property at auction
Can you sell a tenanted property at auction?
Public auction can be an ideal way to sell a tenanted property. Although you might not achieve full market value* for a tenanted property versus selling vacant, there is a strong demand for tenanted properties at auction.
*Tenanted properties generally sell for less than vacant properties because the audience of buyers is restricted to investors only, whereas with a vacant property the audience is opened up to the whole market, including owner occupiers.
Last updated by Mark Grantham on 22nd January 2017
Why sell a tenanted property at auction?
Most people are familiar with the traditional route of selling a vacant property through an estate agent as it’s the method of sale most people choose when they move house. There is no reason why a tenanted property cannot be sold through an estate agent, it just requires the estate agent to find a property investor who’s prepared to pay a fair price.
However, the issue some sellers encounter when they sell a tenanted property though an estate agent (or direct) is that the sale is at risk of falling through (or the price being reduced) because the contract of sale has only been sent to one buyer. A sale fall through or price reduction could be for any reason, including the possibility of the investor having found a better purchase elsewhere!
When selling a tenanted property, public auction offers a very good alternative to a (private treaty) sale through an estate agent, not least because the fate of the sale is not at the mercy of the one, individual buyer. Auction offers the ideal way for property owners to sell at a fair price, in the quickest possible time.
Need some help? Call us on 020 7183 2623 or send us an enquiry online.
Will your tenanted property sell at auction?
When selling a tenanted property, it’s important to know what prospective buyers are looking for. There are 4 key points an investor will take into consideration when buying a property:
– Rental income is obviously very important to an investor. The investor will take into account the cost of finance (buy-to-let mortgage) and other outgoings when calculating their return on investment. If you’re selling a property with a yield in excess of 5% in London or in excess of 9% anywhere else in the UK then that will be considered a good return.
– Covenant strength of tenant – if you’re selling a property where the tenant has always paid their rent on time and there has been no history of problems, then that will look good to any prospective investor buyers.
– Property type – some investors stay clear of certain types property, regardless of the rental yield. For example, some high-rise ex-local authority properties can be difficult to re-finance so won’t be as attractive from an investment standpoint.
– Capital appreciation – for some investors this is the most important factor. Many overseas buyers invest in vacant London property (without any rental income) because they know it represents a secure investment.
Example of an auction catalogue entry for the sale of a tenanted property
Selling a (problem) tenanted property at auction
We’re often approached by property landlords who’ve run into problems with their tenants and have the option of taking legal action against the tenant, or selling the property at auction with the problem tenant still in place. Typical tenant issues include rent arrears, anti-social behaviour, damage to property or subletting the property without permission.
Although there are property investors that specialise in dealing with problem tenants, the price they offer will be below market value. Selling a tenanted property at auction can be a quick and straightforward way to off-load a problem, but it’s always worth looking at your options before selling at a discount; negotiating with the tenant or threatening/taking legal action against the tenant are always worth exploring first.
It’s worth noting that selling by auction is by no means restricted to problem situations. There are many perfectly good tenanted properties sold at auction, for the reasons stated in the first paragraph.
Find out more about auction reserve prices and why they’re so important!
ℹ Selling tenanted?
With reductions in the tax relief for buy-to-let landlords, there has been an increase in rental homes hitting the property market. As a result, more homes are being sold with sitting tenants in place. This page explains the best routes to selling tenanted property.
If you have a question that’s not answered here, please feel free to call us on 020 7183 2623 or send us an enquiry online.
🔍 Also see
💬 Auction talk
“Investor buyers are attracted to auction because it offers a quick and efficient process to acquire properties’ generating an income from day one.“
⚠ Don’t forget
When selling a tenanted property at auction, you should aim to provide as much information as possible in the legal pack. Prospective buyers will bid for more if they can be confident everything is in order. Buyers look for documents such as the tenancy agreement, details of the deposit, gas safety certificates etc. If you don’t have these documents don’t worry, there will usually be investors who are prepared to buy with minimal information.