What You Need to Know Before Selling Your BTL at Auction

Selling a buy-to-let (BTL) property via auction can be a swift and effective way for landlords to divest assets. This method can be particularly appealing for those looking to offload underperforming investments, liquidate quickly for cash flow reasons, or exit the market due to regulatory or tax changes. It also opens your property to a wider pool of potential buyers, including investors actively seeking tenanted properties. However, while property auction sales offer numerous advantages, such as speed, they also come with risks if not properly planned. This article explores what you need to know before taking your investment property to auction.

Why Sell at Auction?

Auctions provide a legally binding sale once the hammer falls, with completion typically expected within 28 days. This makes them appealing to landlords seeking a quick exit, particularly in uncertain or declining markets. The speed and certainty of an auction sale can be advantageous when you need to release capital quickly for other investments or to settle outstanding debts. By comparison with regular sales, which can be delayed by mortgage issues or buyer withdrawal, auctions provide a higher level of transactional security.

Auctions can also attract a wider range of potential buyers, from corporate investors to cash-ready individuals, especially if priced attractively. Competitive bidding in the auction room can sometimes push the final sale price beyond expectations. For properties that might struggle to sell through traditional estate agents, auctions may offer an ideal alternative. However, it is important to know that selling at auction requires thorough preparation and an understanding of the legal, tax and pricing implications. A successful auction sale requires that every detail, from documentation to marketing, is handled thoroughly and professionally.

Key Aspects Landlords Must Consider

1. Preparing Your Legal Pack

Before listing your auction property for sale, you must prepare a comprehensive legal pack. This pack is the cornerstone of the buyer’s due diligence process and can significantly influence how much interest your property receives before the auction. Prospective bidders rely heavily on the legal documentation provided to assess risk and make informed decisions, often without physically viewing the property. Incomplete or unclear information may deter potential buyers or lead to disputes later. The legal pack is typically expected to include the following items:

• Title deeds

• Local authority searches

• Land Registry documents

• Special conditions of sale

• Leasehold information (if applicable)

• Property survey reports

• EPC certificates and compliance certificates

• Tenancy agreements (if rented)

• Fixtures and fittings list

The legal pack builds buyer confidence and helps prevent post-auction disputes. A solicitor with auction experience should oversee the compilation of the pack to ensure it meets expectations and includes all legally required disclosures.

2. Capital Gains Tax

Selling a BTL property may result in a Capital Gains Tax (CGT) liability. As of the 2024/25 tax year, the CGT rates are:

• 18% for basic-rate taxpayers

• 24% for higher or additional-rate taxpayers

The annual CGT allowance stands at £3,000.

3. Selling With or Without Tenants

You can sell an auction property either vacant or tenanted. Some landlords may choose to sell with tenants in situ to maintain rental income up until completion, while others may prefer to offer a vacant property to attract a potentially broader range of buyers. It is important to weigh up the financial and logistical implications of both options before proceeding. Each approach has pros and cons:

Selling Vacant:

• Appeals to both potential investors and owner-occupiers

• Potential for a higher sale price

• May mean some loss of rental income beforehand

Selling Tenanted:

• Appeals mainly to investors

• Offers immediate rental income to buyers

• Must ensure tenancy agreements are robust

If you are intending to sell tenanted, you must communicate with your tenants, double-check your tenancy agreement and abide by tenant rights. Ensure you follow due legal process with your tenant if opting for a vacant sale, as mishandling tenant notice periods can result in legal complications or delays.

4. Costs to Consider

While auctions can provide speed and certainty, landlords must be mindful of the fees and charges that can reduce the overall profit from the sale. Understanding the full range of expenses involved helps ensure that you are pricing your reserve and guide prices realistically. The guide price is the starting point at which bidding will begin and is typically set to attract interest. It may give potential buyers an indicative idea of the property's minimum value. However, it is not a guarantee that a sale will be achieved at that price.  

The reserve price is the minimum amount that the seller is willing to accept. It remains confidential between the seller and auctioneer. If bidding does not reach the reserve, the property will not be sold.  

Setting these prices strategically is crucial for generating interest while protecting your bottom line and should ideally consider the costs of selling a property at auction. Typical expenses include:

• Entry/catalogue fees of around £500

• Auctioneer commission, which is approximately 2% + VAT

• Legal pack preparation, where solicitor fees may vary

• Mortgage early repayment charges (if applicable)

• Capital Gains Tax

• Costs for cleaning, clearing or repairing the property

5. Assessing Property Condition and Compliance

Properties with issues such as damp or structural damage can deter bidders or depress sale prices. It is important to ensure that the property has up to date compliance certifications, including a:

• Gas Safety Certificate

• Electrical Installation Condition Report

• EPC certificate

6. Choosing the Right Auction House

Choosing the right auction house is important to achieve success with auction property for sale. Research auction houses and ensure that you select an auctioneer familiar with the local market and similar property types. Key factors to consider include:

• Experience in selling BTL properties

• National vs local reach

• Marketing strategies

• Success rate and average sale price versus reserve

• Fee structure transparency

Some auctioneers also offer livestream and online bidding to attract wider interest.

Summary of possible Steps Before the Auction

• Consult a solicitor: Especially one experienced in property auction transactions.

• Prepare a legal pack: Include all mandatory and supporting documents.

• Decide on occupancy: Choose between selling tenanted or vacant.

• Conduct repairs: Tackle urgent repairs and ensure safety compliance.

• Choose your auctioneer: Prioritise market experience and marketing ability.

• Set a reserve price: Determine the minimum you will accept in consultation with your auctioneer.

• Market strategically: Use high-quality photos and accurate descriptions.

• Attend or monitor the auction: Be ready to engage in post-auction discussions if bidding is close but not over the reserve.

Conclusion

By taking the time to prepare properly, landlords can potentially achieve a successful outcome when selling BTL property at auction. Whether you are looking to cash out quickly or optimise your portfolio, property auction sales offer a potentially transparent and efficient path for landlords.

FAQs

Q. Can I sell a tenanted property at auction?

A. Yes, many investors look specifically for tenanted properties. Ensure that the tenancy agreements are sound and included in the legal pack.

Q. Do I have to accept the highest bid?

A. Not necessarily. If the highest bid is below your reserve price, you are not obliged to sell. The property will be marked as unsold and may be offered in a post-auction deal.

Q. What happens if my property doesn’t sell?

A. If it fails to meet the reserve, it won’t sell during the auction. However, interested parties may make offers afterwards. You could also relist it at future auctions.

Q. Is auctioning a property better than selling through estate agents?

A. It depends on your goals. If speed and certainty are priorities and your property may struggle in a traditional sale, an auction could be advantageous. However, estate agents may fetch higher prices in a buoyant market.

Q. Can I attend the auction remotely?

A. Yes, some auctioneers offer livestream and online bidding options. You can track bidding in real time and receive updates from the auctioneer.