Why more properties are being sent to auction for a quick sale including a burgeoning number of buy to lets

James Pank, auctioneer and director of Auction House West Yorkshire, has seen a rise in rental properties going under the hammer and says: “We are seeing an awful lot more buy-to-let investors bringing their houses and flats to auction because they are looking for a quick way to sell.

“At auction there’s a four week marketing period and generally four weeks to complete a sale. That’s eight weeks altogether while in estate agency the average time from the point of a buyer making an offer to completing the sale is five months.

“A lot of new landlords have built a portfolio of rentals over the last five years when interest rates were low. They are on flexible interest rates, which have now risen, and are highly geared with large loan-to- value mortgages and this means they aren’t making any profit and sometimes they are running at a loss.”

To keep rental income coming in, many are trying to sell with a tenant in situ. Speed is of the essence for these landlords so they are willing to drop the price to make their property attractive to bidders knowing that, if successful, the whole process will take around eight weeks, which includes a four week marketing period by the auction company and four weeks to complete the deal after the hammer comes down on their lot.

James adds that cash for homes companies are among Auction House’s biggest clients at the moment. They buy from struggling homeowners and landlords at a significant discount and sell the properties at auction for a quick return.

While there are fewer people bidding compared to two years ago, James says that there is still an appetite for property and Auction House’s success rates have not dropped. He adds: “Over the last two or three years, the number of people attending auctions was bonkers but we are now back to 2019 numbers and the usual bidders, which are existing landlords, investors, builders and developers.”

While those selling want a speedy sale are prepared to go with a low and tempting starting price at auction to attract interest, some properties sell for much more.

Kyah Dent of Harrogate based estate agency Feather Smailes Scales, which regularly runs auctions, says: “We price a property competitively to attract viewings and that is the key to success. Those thinking of bidding can see the title plan and the searches on the property and if they want a survey they can commission one.

“We had a house that had been valued in need of renovation in Knaresborough come to auction recently with a guide price of £350,000 and it sold for £422,250. Once the hammer comes down, the buyer has to pay 10 per cent of the asking price and sign a contract to buy that is legally binding and they then have to complete the purchase in 28 days.”

The cost of selling at auction generally starts at two and two-and-a-half per cent plus VAT, if the property sells. So on a £200,000 property, the commission payable would be £4,000 plus VAT.

Auctioneers usually charge a minimum selling fee of anything from £1,500 upwards so if a low value property sells for £10,000 the 2% commission rate will not apply, otherwise the fee would only be £200. Instead the auctioneer will charge the minimum selling fee.

If the property doesn’t sell you might have to pay costs for the advertising. Plus, as with any property transaction, you will also need a conveyancer to oversee the sale.

You can also sell via Modern Method of Auction via estate agents who offer it. Properties are advertised on property portals and the seller sets a reserve price i.e. the minimum they will allow the home to sell for.

Homes often sell for at least 10 per cent lower than if they were sold by the traditional method. The successful bidder must pay a non refundable fee to the estate agents to reserve the property, which is on top of the purchase price.

The buyer then has 56 days to complete the sale. In theory, this allows the buyer more time to arrange a mortgage before the exchange and completion date.