However attached you are to your let property and however lucrative it might have been over the years, there will almost certainly come a time when you’ll want to sell it.
The reasons for you taking that step might be any one of several, perhaps including:
- a change in your business direction;
- the need to free up some capital.
Whatever your motivation, it’s probably safe to assume that you’ll want a fairly rapid and hopefully hassle-free sale and the highest possible price for your property. Very few people actually enjoy the house selling process or feeling they could have done better with that final price, so don’t worry, you won’t be alone in that!
It’s perhaps at this stage that you might start to think “why do I need a guide? Selling a house is selling a house”. Well, not quite!
For a start, there may be taxation issues to consider because capital gains and related issues are quite different for a let-property owner than for an owner-occupier. Then there are the issues associated with preparing for the sale of a previously let, as opposed to previously owner-occupied, property.
In this brief guide, we can’t cover all the issues you’ll need to consider but we can pick out some of the less obvious and more let-property specific ones.
In what follows, you’ll find following sections covering:
- selling while tenanted;
- getting it ready for sale;
- estate agency vs/ DIY sales;
We hope you find it useful!
Please note that this guide is based on our current outstanding of legislation, which may be liable to change.
Selling while tenanted
If your property is unoccupied at the time you start trying to sell it, then obviously this section and its issues won’t apply to you.
However, if you have tenants in residence then things may be substantially different.
While some people may try to tell you that this changes nothing, in reality, you’re going to have to think through a few matters and produce a plan. Don’t treat this lightly because it may prove to be critically important to you.
Your first decision is, do you wish to sell just to other buy-to-let purchasers or include the owner-occupier market?
Selling to owner-occupiers
Although it’s not an absolute cast-in-concrete position, broadly speaking, you’ll need to accept that having tenants in residence might close off this market segment to your sales efforts.
- potential owner-occupier buyers may find it difficult or impossible to obtain a mortgage on a property that has tenants in it – even if those tenants are ‘under notice’;
- psychologically, owner-occupiers don’t always like to consider that someone is going to lose their home so that they can buy theirs (even if this isn’t the reality, it’s a perception);
- HMOs (Houses in Multiple Occupation) can be particularly off-putting to potential owner-occupiers if multiple tenants are around;
- viewings and your potential battles for legal access permissions with existing tenants can be a nightmare and off-putting for potential owner-occupier buyers.
If you wish to give yourself the broadest possible target buyer marketplace, you may be best advised to work towards a sale under ‘current vacant possession’ terms. There is though, a downside to that (see below).
Selling to other buy-to-let buyers
If you’re planning to try and sell to other landlords or potential landlords, having tenants in residence while the property is up for sale might be a positive advantage.
- it maintains your income stream until the property is sold;
- you won’t have to think about things such as unoccupied property insurance (see later sections);
- occupied properties are typically at lower risk of things like burglary and vandalism than those standing unoccupied;
- some potential buy-to-let buyers will welcome indications that a property is purchased with an income stream in place from day-1 (though some might also prefer a ‘clean slate’).
However, there may also be some issues with that:
- some tenants may create difficulties with arranging access for viewings – and they do have legal rights in that domain;
- you may find it difficult to ‘freshen up’ the property ready for sale with tenants in residence;
- legal squabbles with tenants over vacating and dates plus potential transfer/continuity of tenancy agreements;
- if you have ‘difficult’ tenants, another experienced landlord might spot that in an instant and be put off.
Tenants in place
Many potential issues in terms of ‘difficult tenants’ can be dealt with by friendly and consultative discussions up front. The vast majority of tenants, if they know what’s going on and are convinced that their considerations have been taken into account, will cooperate.
If you decide to progress along the vacant possession route, make sure that full consultations are held, as much notice as possible is given and above all, legal formalities are complied with. There are various routes depending upon the nature of your tenancy and a full discussion of those is outside the scope of this guide.
Full information is available online and if you are in any doubt, you should consult a solicitor.
Fortunately, the insurance issues associated with selling a let property are neither complicated nor numerous.
They are though important and should not be overlooked – something that does, unfortunately happen sometimes when landlords become heavily involved in the sales process.
Once your property sale goes through, responsibility for the insurance transfers from you to the buyer. Your solicitor should make clear the exact date/time your cover should cease and the new owner’s take over.
This is rarely a problem but do be certain you understand and keep cover in place until your legal adviser has confirmed it can be removed. Don’t forget that this is also likely to be a requirement of any buy-to-let mortgage you may have in place.
If you have decided to sell your property with vacant possession, you will typically have asked the tenants to depart in advance, having complied with all legal requirements.
This position immediately generates two key points to consider:
- your need for landlord’s insurance does not vary. While your property is unoccupied, you cannot change to an owner-occupier policy;
- the moment the property stands unoccupied for a period of time greater than that specified in the policy, typically around 30 consecutive days or so, your existing policy cover through your landlord’s insurance will become invalid. In order to maintain cover, you will need to consider unoccupied property insurance.
It’s worth being very clear that the above positions are not affected by whether or not your property is standing unoccupied and furnished or unoccupied and entirely empty. In both situations, you will require unoccupied property cover.
In some cases, if your property is going to undergo substantial and lengthy renovation prior to sale, an additional form of cover may be required. A provider of unoccupied property policies can advise further on that one.
Getting it ready for sale
In principle, this is something that should be fairly obvious.
It doesn’t matter whether your buyers are owner-occupiers or another landlord, they will want to see a property that’s in good decorative order and condition. They’ll also prefer properties that look ‘fresh’.
A particular issue for let properties is, of course, the status of any tenants.
So, here are a few tips:
- put right anything that is visually off-putting from the outside. Remember that many potential buyers will do a drive-past or walk-past before deciding if they wish to visit. So, leaky gutters, rusting downpipes, rotting windows and other things like them, will be a big and immediate turn-off;
- clear up your garden, if required. Weeds, rubbish and (e.g.) rusting bicycle frames, will all sow a perception of sleaze and a lack of care on the part of you and/or your tenants. That’s a bad vibe for potential landlord buyers;
- inside is more of a challenge but don’t ignore it just because you might have tenants in place. So, with the logistical cooperation of your tenants, freshen up the décor. It doesn’t have to be radical but just bright, clean and preferably neutral in terms of colour schemes;
- make sure that the freshen up includes putting right anything that spoils the effect and isn’t just a question of paint. Examples include dirty or tatty light fittings being replaced, peeling wallpaper ‘sorted’ and bathrooms being given a bit of a makeover if they look like they were last updated back in 1955;
- if you have any highly eccentric décor, it’s probably best removed. So, that Che Guevara stencil on the wall that looked great in the ‘70s may simply now look dated and convey messages of student squats and the like, which is not what buyers probably want. Opt for middle-of-the-road décor and colour schemes that may not delight anyone but they won’t put anyone off either;
- sort out any tenant grumbles or disputes before viewings start. As mentioned earlier, experienced landlord buyers will spot tenant discontent and it’s likely to make them think twice or possibly run away. Even if your tenants are under notice, this is important. It’s even more critical if the tenants are coming with the property – no landlord buyer wants to take on another landlord’s ‘problem tenants’;
- although not strictly speaking related to selling, keep in mind that all outstanding rent arrears need to be resolved before you sell. Your chances of getting them resolved after a sale may be close to zero;
- make sure all the legal safety and compliance requirements have been dealt with and are up-to-date (e.g. fire inspection certificates if applicable). An experienced landlord will want to see evidence of that;
- some landlords may ask to see your books of accounts, particularly if you’re selling the property with tenants in place. There’s no legal requirement to share your details with a potential buyer but if you don’t when asked or seem evasive in producing them, it may sow suspicions that you’re trying to hide something. So, make sure they’re current and intelligible;
- if you’re currently involved in a legal dispute with a tenant, you may be legally obliged to declare details of that. Discuss the specifics with your solicitor but have a tidy written summary of the position available just in case.
Don’t forget that when you’re selling a property, particularly one being used for rental income, how a potential buyer sees you personally may be a big factor. If you’re handling the viewings, be sure you’re presentable, polite and professional. So, for example, avoid trying ‘hard sell’ techniques and above all avoid criticising your property, your tenants or the local area etc.
If you’re using a property agency, make sure you know exactly who will be fronting viewings for them. It’s not unknown sometimes for this task to be allocated to relatively junior staff members who, through inexperience, may decide to expand on things about the property and its tenants that you’d prefer were best avoided.
Estate agency vs / DIY sales
How to market your property? There’s no easy answer.
Many estate agents can be great professionals who will work the market on your behalf. They can connect you with premium buyers and remove a huge amount of the sales admin from your shoulders. That’ll save you time and that’s the same thing as money in many instances.
On the downside, they will charge for their services and some of their fees may be significant. It’s also worth noting that some estate agents may be rather less effective and professional than others, simply believing their role to be one of just placing a few photos in their office window and an ad in the local press.
Here are a few general tips:
- ask in advance, what exactly the estate agent will do for their fee. Most will have some sort of ‘service proposal’ pack, which you should read carefully. If they don’t or seem unsure what it is exactly they’re doing for their fee, then consider looking elsewhere;
- identify what the agency is proposing that you couldn’t or wouldn’t wish to do yourself. If the list is substantial, then that might be a powerful persuader to use an estate agent rather than adopt a DIY approach;
- look for an agency that has potential buyer lists. That could save you a lot of time but keep in mind that professional buyers on such lists may be there just to look for ‘bargains’ and sellers that are desperate. So, if you need to move fast they may be attractive but if you have time to spare, there may be no need to jump at the first offer or two;
- some agencies may be exclusively or largely residential property in orientation (i.e. servicing owner-occupiers). You may be a better fit if the agency has some experience in selling buy-to-let properties;
- take note of the personnel you see around their office. During sign-ups you’re likely to see a senior person who will be very knowledgeable. That’s good for overall supervision but if you see lots of much younger and clearly inexperienced people around, you should ask just who will be managing potential viewings on your behalf;
- ask for specifics about where your property will be advertised. Today, the internet and social media may be critically important though conventional ads in newspapers, magazines and the agency’s own window displays, all still play a part. Be wary of propositions along the lines “you won’t need the internet, we know all the buyers in this area”;
- read their fee structure carefully and look for ‘extras’. You should never be caught by surprise with the final bill.
There’s no reason why you shouldn’t try selling your property yourself to try and save money. The sums may be considerable.
However, remember to take into account:
- you won’t be facing ‘zero cost’. Advertising costs money;
- a shotgun-scatter type approach to advertising is rarely effective. You’ll need to research channels and locations that are likely to be the most productive for your given property. Material on this is available online but it can be time consuming to get up-to-speed;
- you’ll need to make lots of time available for phone call and email enquiries plus the subsequent viewings. Buyers that can’t reach you easily or who find you inflexible in terms of viewing times, may simply go elsewhere – and quickly;
- you will have a higher overhead in terms of liaison with your solicitor and the buyers. Good estate agents do a lot of admin and coordination work, much of which is often invisible to the seller;
- some agencies, even if privately, will know when some ‘theoretical’ buyers are, in fact, timewasters. They will screen those out usually but you won’t know. So, you may have a higher overhead of no-hope viewings, which can be frustrating;
- make certain you understand the legal issues and sequence of events surrounding initial deposits, exchange of contracts and completion etc.;
- typically, an agency will make some effort to ascertain the financial status of a viewer/potential purchaser. That can involve a number of discrete methods. If you’re selling on a DIY basis, you’ll need to do that yourself if you wish to avoid potentially wasting lots of time.
Essentially, there are pros and cons to both approaches. The one you select will depend upon your unique circumstances and position.
Even in a buoyant marketplace, it’s never easy or a matter of routine to sell a let property.
If you are relatively relaxed about timescales, you will have the chance to think things through and move at your leisure. In that scenario, you may find that you’ll need relatively little third-party assistance.
On the other hand, if your need to sell is pressing, you may need the help of others including decorators, builders, your tenants and an estate agent.
Above all, it’s worth noting that sometimes relatively minor differences of approach can make all the difference between a fast and slow sale. It may be similar in terms of one that yields you a price you’re happy with or leaves you feeling grim. Much of that is to do with the appearance of the property but also buyer perceptions of the viability, for them, of your business and its tenants (if any are in place).
It’s important to remember that unless your buyers are owner-occupiers, you’re selling a property but also a business. That business must look as attractive as your bricks and mortar, if you want a fast sale and a reasonable price.