WWYD - sell property at auction? Sale fell through last minute

[Thierryhenryneedisaymore]

This post is for a friend, who is very upset and not able to see any light at end of tunnel. Im trying to get some advice from people who may have sold a property at auction before i suggest an option.

She owns a house from previous relationship. Its been rented on and off for years. Always wanted to sell but periods where she couldnt afford it lying empty with no rental income to cover mortgage.
She had a tenant in the property recently but it was also for sale at same time. She accepted offer from seemingly straight buyer some weeks ago. Gave tenant notice. Tenant was ok with this as she only wanted a month to month contract as she was saving to move in with partner and now she has done just that.

All well until the sale fell through when buyer pulled out last week just before signing. No reason. Cold feet apparently. No going back. House now empty.

House is in area where there is demand for rental. She could rent it again. But she is so depressed as she has debts that she wanted to clear from the equity. Including credit cards where 0% only runs til Feb. She hasnt told me intricacies of finances but her being so upset. And with other things she has said, large unexpected expenses, i think she is in a bit of debt. She cannot afford to keep it empty, because she has the mortgage to pay. Even if someone wanted to buy tomorrow she would be two months with no rent, she says she could do this, but she could hardly stand the uncertainty of knowing it could fall again.

Think she is what you call an accidental landlord.

So, the point of the post. Does anyone have experience of quick sale at auction? I didnt even suggest this to her as it might get her hopes up so i thought i would ask around first. It seems too good to be true. I see that the fees are higher than estate agent but do you really end up selling for much less than market value?

I see there is a reserve price, private between seller and auctioneer, no sale below that. And a guide price which is the price it lists at.

Any advice / experience much appreciated.

This is a decent perfectly habitable 3 bed house which has no major survey issues, in a good, desirable area.

Estate agent says price sought is fair and it seems comparable to others in area if not less.

TIA

Following as I would like to know what selling at auction is like, I have a relative who may consider this

It is unlikely she will get anywhere near the sale price she is looking for at auction. If she needs to sell quick get her to discuss reducing price with her estate agent or the best option imho is to remarket property with a brand new agent. Either way the house needs to be marketed with a view to getting a fast sale ie lower price.

She's best off tenanting it again while she sells, unless she can afford to take a major hit on the price, which it sounds like she can't. The credit cards can be balance transferred to another 0% card to buy her some time

Thanks Mrs Trowman. I think the balance on the cards is too high to transfer.
To be fair to her, i don't think she is a reckless spender. She has had a lot happen in the past two years so probaby just thought she would be able to sell quicker.

She told me also that she had secired a new mortgage deal for her own house, saving her 100 month over two years, but thats weeks away from agreement, has offer in principle, it will likely fail now with the debt (she would have cleared with sale proceeds). She does not want to / cant take a loan to consolidate, i dont know shy / details but is very clear about that.

Most agents will have investor buyers on their books who will buy quickly for 10-20% less than market rate. would that appeal?

10% at an absolute push perhaps but 20% she would not cover the mirtgage

Marketing with a new agent is not to be sniffed at!
I would be inclined to drop price a little and find a new agent, new pictures, new brochure etc.

Selling houses is so shit! Your friend has my upmost sympathy.

She could speak to the bank. It may be that if she sells at 20%below price that they can consolidate the remaining plus the other debt into one loan that she pays off over a period of time. Just another suggestion.

I bought just before the 2007 crash and sold on 2015. Bought for 179000 and sold for 150000. It's horrid to think of lost money but we had a reason to sell and it comes to the point where you just have to cut your losses....

After my Dad passed away 4 years ago we decided to sell his cottage. We did nothing for about 6 months, then decided to put it on the market, as we didn't want to rent it out and be responsible as landlords. We already have a flat that we rent out via an agent, so knew what it would entail; but this was a 17th century listed property, with wattle and daub walls etc... completely different story. We just felt it was going to be a money pit, so decided to sell.

I put it on the market with a local agent, had loads of interest and after 4 failed sales, decided to go to auction. It was a very easy process - there was an open day for viewing which was well-attended (auction company organised this - we weren't there). I think the auction took place at Leicester Cricket Ground - nowhere near where I live! We agreed on a reserve price, with the auction company - we did not attend the auction, just let the company do it. I was told what time the auction was going to start, and then got a phonecall about 30 mins before the start of the auction. Someone was prepared to pay £30k over the reserve price, so I agreed the price immediately. The money was in my account within a few days - it was very easy.

Purpleclaire,
That sounds good. Difficulty here is there is a mortgage in place and not a lot of equity. I think its the stress and hassle of a tenant and then getting offer and hoping it will go through against possibly just taking a massive hit to be free

We sold at auction. Had been on the market for a while, a few offers, a lot of time wasters. In the end it went to auction while under offer with someone that was dragging their feet, and some people that had not seen it all the time it had been for sale previously for some reason (suspect the agents) came to see it and wanted to buy it.

We had to tell the first buyer and they had the chance to exchange but although they were under pressure to sell their house they failed to do anything about it.

So, we sold it to the second buyers. It went very quickly and no messing about like you get with agents.

She will likely take a massive drop in sale price at auction. It is normally a last resort for hard to shift properties that need a lot of work etc.... or repossessions.

I would get it back on the market now empty and try and get a quick sale.

Thanks for all the replies.
Curly, was there a price hit then?

she would probably take a big hit at auction, the most recent SE auction catalogue sale had only a 60% sale rate as opposed to 95%, 2 years ago.......ie the market is very stagnant.

She should relet as fast as possible then, approach her BTL lender for a further advance,
unless she is very highly mortgaged, she should be able to get a cash amount to pay off her debts, (and keep the property)

She must make sure her rent is enough to cover her new borrowing costs, if not then she can change to an interest only loan, this will be much cheaper, and whilst not ideal if it is your only home, as you do need a way to eventually pay it off, is fine for a BTL as the eventual sale of the house will clear the loan.

That solves he immediate problem, the mortgage rate will be much better value than moving to credit card fees once the 0% has ended.

Once the dust around Brexit has settled she will probably be able to sell more easily and possibly for a better price, of course this may be 2 or 3 years ahead.

Can she get in touch with the buyers that pulled out and offer them a discount? If all they had was cold feet maybe 5-10% off might interest them again.

Could she speak to the bank and take a mortgage payment break while it's up for sale. The banks are usually accommodating in these circumstances as they know it's being sold and they will get their money. It will take the immediate pressure of her while she puts it back up for sale.

Try to advertise with an agent ASAP list as offers over just above the absolute floor price shed accept. It's a bad time to get a tenant just before Xmas too.
The above worked for us.

Can she tenant it and then sell it with sitting tenant to someone who wants to be a landlord ?

I did something similar with my last home. I lost money on it but it got it over and done with quickly. It got to a point that the stress of the sale was badly affecting my mental health and it just had to go asap. Fortunately, I could take the financial hit. In retrospect, I should maybe have waited, at the time my mental health was going down hill very fast and it was the right decision there and then.

List it on AirBn. Could then easily sell it whilst getting more money than you get with normal rent.

Friend has got exactly the same problem. Accidental landlord, tenants from hell leaving soon, no sale on the horizon etc and a fair amount of personal debt built up over the letting years.
The bank has just agreed (yesterday, following a telephone interview) a not small increase on principal mortgage sufficient for home improvements, pay off various credit cards and leave a rainy day fund. It's an extra £100 per month on her mortgage.
It will depend on your friends equity in her home, but get her to speak to her bank. Without feeling so up against it she can take a bit more time.

She could Airbnb it in the interim

It will sell well below market rate at auction because you can only buy at auction with cash. I would suggest just dropping the price to the bare minimum she can afford in the hopes that someone will bite.

Thanks so much for all this really helpful advice, all i was thinking to suggest to her was the auction idea but there are so many possibilities here. Thank you all.