Failed to sell at Auction

This is an interesting case study.

The Landlord was fed up. They had recently served notice on a tenant and the property was in poor condition. They tried to sell but the relationship between landlord and tenant had soured and the tenant was difficult with viewings and access. The property failed to sell.

Now, with an empty property paying a mortgage, service charge and utility bills the owner decided to enter the property into auction. The property auction was a 'modern method' and finally sold at £165,000, or so she thought.

When the property auction ended, the buyer didn't pay the deposit straight away and instead instructed a damp survey and wanted to re-negotiate the purchase price down to £155,000, due to additional damp works. The seller was desperate and was thinking of accepting.

The agent suggested 'The Property Step System'. After a short conversation, we agreed a purchase price of £165,000. So immediately the owner was £10,000 better off using the property step system. However, she had defaulted on her mortgage, in mortgage arrears, and a chance of being repossessed.

So, we agreed a monthly market rent. Based on the contracts being completed in 48 hours, we would deposit the rent that coming Friday (4 days from the initial conversation). This meant she had the money to pay the monthly mortgage, with a little extra to pay down some of the arrears.

This person had become a Landlord Seller.

A pre-agreed purchase of £165,000. A pre-agreed timescale of 12 months. A pre-agreed rent of £825pcm for the fixed term of 12 months.

• She had no deductions to the rent
• No agency fees, no maintenance costs, no certificate costs. No deductions whatsoever.
• This was a commercial agreement.

The tenant buyer, knowing it was a 'buy now, pay later' style of agreement was happy to spend their time and money refurbishing the property. The sale completed within the period and both parties were delighted.

It was a win-win solution.

RISKS

• There was risks, just like the conventional house buying process. If the tenant buyer failed to complete the purchase with the specified 12 month term, the Landlord seller could refuse to sell.
• This process, and the contracts we use have been around since Oliver Cromwell. Its legally binding on the seller and legally like an 'exchange of contracts' the seller cannot withdraw during the specified term period. They must sell to the buyer.