As a landlord, you probably have a rough idea – from the outset – about when you’ll sell your investment property. You might have a specific date in mind (e.g. when the kids leave home); an event (e.g. when the boiler breaks down); or perhaps a monetary threshold (e.g. when the property is worth more than you paid for it).
Whatever the timing and reason for selling, the sale of a property is not the end – in fact, it’s a final opportunity to make the most out of your investment.
The open market or ‘traditional estate agency’ generally remains the most popular way to sell properties but it’s filled with potential downfalls. Sellers risk exposure to property chains; there’s a 1 in 4 chance of the sale falling through; and even if everything goes well, financial commitment is not usually secured until two weeks before completion.
Many landlords spend months with an empty property languishing on the market, and may end up selling for less than they originally hoped for. But it’s not the only option.
At Open Door, we believe that modern property auctions are the best way for investors to sell. Two of the main reasons for this are as follows:
Benefit #1 – greater control.
The process of buying and selling property is often stressful and you can quickly feel out of control if your agent starts to reduce your selling price. This can’t happen at auction where you set a reserve price to ensure that you get the right amount for your property. While your guide price may change, your reserve price shouldn’t.
Greater control is also attained through:
1. Upfront legal packs which make any legal or contractual issues clear prior to marketing;
2. A 10% non-refundable deposit which is received upon exchange, putting vendors in a very strong position for their next purchase;
3. Vendors and buyers setting their own completion date on exchange (not always 28 days), rather than allowing solicitors to dictate the speed of the transaction.
A second core benefit of modern property auctions is:
Benefit #2 – greater security.
In Q1 2016, according to Which?, more than 1 in 4 traditional house sales (28%) collapsed. This is a staggeringly high percentage.
In contrast, the chance of an auction sale falling through is much reduced – at Open Door, our fallthrough rate is less than 2%. Why? Well:
1. We qualify all viewers to ensure that they are in a good position. This cuts out of a lot of “time wasters” and “tyre kickers” including people in property chains;
2. We take a 10% non-refundable deposit from buyers within 24 hours of an offer being made. Nobody wants to part with this amount of money on a whim;
3. We exchange contracts within 24 hours of an offer being accepted, binding the vendor and buyer together much earlier in the sale process.
As a result, we believe that modern auctions offer much greater security to both the vendor and buyer who know that an auction “sold” board really does mean sold.
This means that auctions are a great option for landlords.
Many people still believe that property auctions are for rundown, dated properties that are sold below market value. But that simply isn’t true! Since we opened our first office in 2012, we’ve sold terraced, semi-detached and detached houses at auction with prices up to £850k.
In this time, we’ve worked with lots of landlords who have successfully kept tenants in place during the sale process, avoiding vacant ‘dead time’ on their investments. In fact, we’ve seen lots of landlord-to-landlord sales at auction, and having a tenant in place is often seen as a bonus!
Until next time.