5 biggest mistakes when selling a tenanted property
December 2, 2018
Although there are many similarities with selling a non-rental property, putting a tenanted property on the market comes with its own unique challenges and benefits - for you, your tenants and the prospective buyer. First and foremost, you’re not dealing with an empty property. This is undoubtedly a business transaction but having tenants in place adds another level of responsibility - as well as huge advantage - for you.
Selling a property within the private rented sector can be more difficult than in the general housing market as you’re naturally dealing with a smaller market. However, like any business decision, with careful preparation, openness, and a considered strategy, it needn’t be a problem.
To help you along your way we’ve compiled a list of some of the biggest pitfalls that landlords can fall into, as well as some tips that will make the whole process a lot smoother.
Failing to know who you want to sell to
If you are selling a property with tenants in place then you are in a very fortunate position. The value of property is expected to carry on growing and demand for private rented property is not slowing down either. This does, however, also place a restriction on the pool of people who can buy your property, as you will receive little interest from the non-renting market. Many people looking to buy a tenanted house are looking for a relatively safe investment, so an occupied tenanted property is a much more attractive prospect.
Be careful to identify those potential customers who are right for you, or you could risk wasting time talking to people who are never going to purchase your property. Timing is crucial when you are trying to sell a short-hold lease house. This is especially true if you are near the end of a tenancy agreement.
Bear in mind that if you fail to sell the property and your tenants move out you will be left to make up the difference in their rent on any outstanding mortgage payments which can quickly become costly. On the other hand, if you have good tenants then you will have a much easier time finding a willing buyer because reliable tenants can be considered as much of an asset to a potential investor as the overall condition of the house.
Forgetting about the tenants
Your tenants are vital to helping your sale go well. Firstly, if you think they are able to pay for the house you should seriously consider offering it to them for sale. This will be the easiest way of selling your property, especially if you have a good relationship with them. If you think they are unable to buy the property you should still let them know that you are thinking of selling the property. This will involve you informing them that they are entitled to stay on and that it will not affect their current contract in any way. In many ways your tenants are part of the property. It is therefore your responsibility to be as transparent and open as possible when you are selling your property. However stressful it may be for you, an informed party, it is typically a scarier and more uncertain time for those actually living in the property.
Impinging on your tenants
If in your tenancy agreement your tenants are entitled to ‘quiet enjoyment’ of the property then you cannot assume that you will have free access. This can be a major impediment to getting yourself organised to sell your property. While you are entitled to enter the property to make emergency repairs you are not necessarily entitled to have access for things like surveyors or to make cosmetic changes like repainting, even if you give your tenants notice. This article from Citizen’s Advice is a useful reference guide and one every responsible landlord should be very familiar with. This is especially important if the tenants are intending to stay on past the sale and onto the new owner. They are much more likely to help you sell the property by ensuring it is tidy and presentable, so keeping them onside is very important.
It is also unfair to your tenants to subject them to needless intrusions, so you should always try to be as respectful as possible. Remember if they move out and you have failed to sell you will have to swallow the costs! All in all it is much easier to be as organised as possible and work with your tenants, who will usually be more than happy to help you. Given that you cannot evict them just because you want to sell, it is vital that you treat your tenants with respect.
It also means that if you have difficult tenants, especially if they are on a shorthold tenancy agreement, it may be easier to just wait until their lease ends and then sell if you are able to.
Limiting your marketplace
In the age of the internet, it makes a lot of sense to consider selling your property online. This is an emerging opportunity that a surprising amount of people fail to fully utilise, even though many people are happy to buy and sell clothing, furniture and other items online. If your property is in good condition then you may do very well at an online property market as you have the ability to reach a far wider customer base than traditional methods which are sometimes limited by geographical location.
This is especially true if you need to sell off your property fast. An online marketplace makes it easy to sell when it is convenient for you, while also allowing you to collect rent until the property is sold - few high street services can match this. It can also be a good way to free up some liquid capital as selling online usually involves far fewer extra costs while also giving you the freedom to sell when you want to.
As a responsible landlord you will already be compliant with the relevant legislation on tenancy deposits, and will have secured it in one of the three Government-assured schemes. But what happens to it after you stop being the landlord? It is, after all, a significant amount of money. When you sign your property away you stop being the landlord, but you are still in charge of transferring the deposit. This is generally taken care of by your conveyance solicitor but it’s worth bearing in mind that you should at least consider building this amount into your property’s asking price.
Try and consult the services of a good conveyance solicitor who is familiar with selling tenanted properties, as they can simplify the whole process for you. If you’re in a deposit scheme - which we strongly advise you to be - contact the scheme directly to discuss the transfer of ownership, as guidelines vary from company to company. As ever, getting organised and doing your research early will help you avoid or deal with any problems that may crop up along the line.
Whatever your reason for selling your tenanted property these are some basic blunders to avoid. Some of them will be harder to avoid fully, especially if you are selling because of a change to your finances, or a time-sensitive issue. However, by recognising them early on you can mitigate being caught out, allowing the sale can go through as seamlessly as possible.
At Vesta, we believe that buying and selling properties with tenants in situ is the best way to minimise your costs, eliminate rental loss and reduce stress for tenants. For more information on how you can sell your tenanted property online, get in touch with our friendly and knowledgeable team today!