2) This must read report will teach you everything you need to know about selling your property portfolio via an "Auction House" - - - - -
sell your portfolio
via an auction house
all the pros and cons below
Auctioning a house portfolio
selling a portfolio - via auction house
10 minute read
If you're thinking about selling your property portfolio via an auction house - then you're probably wondering how it all works - and whether it's possible to sell your property portfolio in this way?
Take a look through some property auction catalogues and websites and there you'll find property portfolios for sale alongside individual properties.
So YES it's possible for you to sell your property portfolio via an auction house.
However you need to go into an auction with your eyes wide open - because you only get one chance to sell your portfolio.
And I'm sure you'd rather avoid making any expensive mistakes?
So this guide will help you to learn exactly how auctions work. And what the pros and cons are compared to other ways of selling your portfolio.
homes under the hammer
I'm sure you'll agree that buying and selling at auction has become very popular these days - largely due to TV programs such as Homes Under The Hammer where the auctioning process seems quite simple?
Maybe too simple?
Please bear in mind that Homes Under The Hammer is TV entertainment for the masses. And is primarily looking at auctions from the buyer point of view - as opposed to you the seller.
And also bear in mind that selling an entire property portfolio via an auction house will be an emotional roller-coaster.
And some might say "a bit of a gamble".
Sell your property portfolio
- No Fees
- Less Tax
which properties sell at auction?
A property auction is a place for buying and selling many different types of property. For example:
- Houses and Flats - the places we all call home.
- Commercial Premises - shops, pubs and clubs, hotels, warehouses etc.
- Property Business - PROPERTY PORTFOLIOS, Houses of multiple occupation, serviced accommodation etc.
- Land for Development.
Your Property Portfolio falls into category 3 "Property Business".
That's because a property portfolio is an income generating machine in its own right - just like any other business.
So think of your property portfolio as a "Property Business" and not just a collection of houses to be sold to multiple owners-occupiers.
how do UK Property auctions work?
At all auctions there's a person in charge who's called the auctioneer. And it's the job of the auctioneer to start the bidding process off by suggesting an initial low price to get the bidding process started.
He'll say something like "who'll start the bidding at £100,000".
Bids can be made by:
- People at the auction
- Telephone from any location
- Online from anywhere in the world
Once someone has accepted the initial suggested bid - this starts the bidding process - where each subsequent bid has to be higher than the previous bid.
And so the price keeps increasing until bidding stops and the person who's made the highest and final bid wins the auction. Though this bid must also reach the reserve price to achieve a sale.
The sale is concluded and final once the auctioneer brings down the gavel (auctioneers hammer). At this point the property is sold and exchange of contracts has taken place.
It's in the interest of the auctioneer to get the final price for your portfolio as high as possible.
Because their fee is based on the final selling price.
the auction process.
auction reserve and guide price
The reserve price
The reserve price is a pre-agreed "minimum price" that you'll allow your portfolio to be sold for. It is known only by the auctioneer and you the seller - not by the bidders.
As soon as the bidding price meets or exceeds the reserve price - this means the portfolio will definitely be sold and the winning bid will be binding.
However if the maximum bid falls below the reserve price then the portfolio will remain unsold - though it can still be sold after the auction.
Setting the reserve price
Set your reserve price low but realistic. You'll then drum up a lot of interest and have multiple buyers all bidding against each other.
The guide price
The guide price is the price the auction house expects your portfolio to eventually sell for. This price isn't secret and is freely available prior to the auction.
Often a guide price is set low to attract a lot of interest from buyers.
Some might say artificially low.
Setting the guide price
Your guide price is something that your auction house can advise you on and set for you.
As already mentioned it's key that your guide price is set at a level to drum up a lot of interest and get the bidding process going quickly.
auctioning a house portfolio process
The entire auctioning process for a house, flat, PROPERTY PORTFOLIO etc can be as quick as 6-10 weeks. This time period includes a month prior to the auction and a month afterwards.
One of the key advantages of selling your portfolio at auction is that as soon as the gavel drops - this signifies the sale of your portfolio and there's no going back for the buyer (or you the seller).
At this point your buyer has to put down a 10% deposit immediately. And they then have to complete the purchase (by paying the remaining 90%) within a month from the date of the auction.
If the buyer isn't able to pay this 10% deposit immediately or the 90% balance within a month - then you can sue them.
which auction house to use?
You need to ensure that your auction house specialises in auctioning commercial property. And more specifically that they are proficient at selling property portfolios.
You'll find many auction houses to choose from and your decision which to use may depend on where you live. And also which auction house is local to you.
Alternatively your portfolio may be located in a different part of the country to where you live. In which case it could make more sense to choose an auction house closer to your portfolio.
Many estate agent chains will have an auction department so you should take a look at these also.
How to choose your auction house
- Do some initial internet research and select between 3 - 6 different auction houses that appear well versed at selling property portfolios.
- Ring each one up to discuss your portfolio and get an initial feeling on who seems the most proficient (and interested) in selling your portfolio.
- Form a list of favourites and then go and talk to each of them to see how they differ from each other.
- Attend some property auctions for a dummy run. You can attend most auctions online as well.
- Fees will be high - so ensure you get a thorough understanding of the fees - so you can compare.
auction house selling fees
The selling fees will vary depending on the auction house you choose. And because you're selling a portfolio of properties, you'll need to understand how this impacts on your costs.
You can take the following as being representative of the fees you'll pay when auctioning a house portfolio - though as always conduct your own research.
- Selling Fees - Your fees to sell will be around 2.5% of the sale price. And even if your portfolio doesn't sell - you'll still be liable to pay fees
- Legal Pack - In order to sell a property at auction, you'll need your solicitor to draw up a legal pack. This legal pack will be available to all potential buyers prior to the sale. Cost £350 - £550.
- Conveyancing Fees - Once the property portfolio has been sold you'll need to pay your solicitor additional fees to perform conveyancing on the properties. you should expect to pay between £450 - £750 + VAT.
To recap - 2.5% of final sale price + up to £1300 in legal fees per property.
accepting auction offers in advance
Your portfolio will be marketed in advance of the actual auction day via website marketing. And also via multiple viewing days.
Then later on - the auction catalogue will be produced.
So it isn't unusual to receive offers prior to the day of the auction. In which case the question rises whether to accept any offers made or not?
The balance to be made here is:
- Certainty of sale to the person making the pre-auction offer.
- VERSUS continuing to auction and getting a better offer.
- VERSUS continuing to auction and your portfolio remaining unsold.
Whether to accept a pre-auction offer or not can depend on your situation and your need to sell very quickly or not. So there isn't any advice that fits all situations.
However let's say that you're already committed to all of the auction costs previously listed (auction and solicitor fees). Then you may feel that you may as well continue to auction and see what happens.
This pre-auction buyer should still be interested on the actual auction day. And they may end up bidding against other interested buyers - which will of course drive up the final sale price.
However they could also change their mind - and you could end up losing a sale.
marketing your portfolio
Your auction house should be doing their best to market your properties via their website and auction catalogue etc. But never trust your auction house to do all the work required.
If the right kind of buyers aren’t in the room on the day you could lose out.
No one is more interested in the sale of your portfolio than you are. So make sure you present it in the best possible light by doing any obvious work required and by enhancing curb appeal.
It won't cost much to do a bit of weeding and put a few hanging baskets up which all helps with the presentation. And which will in turn will increase the number of interested parties.
You should also publicise the sale of your portfolio via social media to as many potential buyers as possible.
the auction day
On the actual auction day there's no need to attend. In fact most sellers are a bag of nerves with so much riding on the sale.
And of course you may not be able to attend if you have work or personal commitments to deal with.
Most auctions are online these days so you can always watch from:
- the comfort of your own home
- your office
- your smartphone on the beach
selling after the auction
There's one important reason why attending your auction could be a good idea - and that's if your portfolio fails to reach the reserve price by a small amount.
In this situation you could consider talking to the person who made the final bid (that almost reached your reserve price) and seeing if you can strike up a deal to sell - selling after the auction.
And of course you can only do this if you're actually at the auction.
pros and cons - auctioning a house portfolio
- High selling fees
- Buyers Demanding discounts
- High Capital Gains Tax to pay
- No negative equity purchases
- No guarantee of selling
- Auctions are a bit of a gamble
auctioning a house portfolio conclusions
Auction Houses are one of the traditional selling routes for selling a property portfolio and they can handle the entire sales process for you.
However make sure you do your due diligence and talk to a number of auction houses. Don’t just go with the first one you talk to.
Auction Houses are well versed at the job at hand - and will have relationships with buyers with deep pockets who are looking to invest in property portfolios.
However selling via an auction house WON'T BE CHEAP. Their services will cost you (from our research) 2.5% of sale price + up to £1,300 in legal fees per property.
And the buyers you'll be introduced to will probably be savvy investors looking for a bargain.
So you need to make sure you don't end up selling too cheaply.
Sell your property portfolio
- No Fees
- Less Tax
Property Portfolio Sales - Getting in touch
Thanks for reading our website.
If you'd like to learn more about selling your property portfolio to Property Portfolio Sales - then please get in touch for an informal chat.
You can tell us about your portfolio - and then together we can look at ideas on possible ways for you to sell.
Phil Calladine - proprietor & consultant