Options for selling your property with tenants in situ
If selling your rented property with vacant possession doesn’t seem like a barrel of laughs and you are wondering how you can sell with tenants in situ don’t worry there are multiple options for selling with tenants. There are of course pros and cons of selling via each option but weighing up all of your options and finding the right solution for you will pay dividends in the long run.
Option 1: Sell your tenanted property to a house buying company
At the end of the day, if you’ve made the decision to sell up and get out of the rental business, you want to do it now, not months down the line. Life is short, and that beach is calling you, so why wait weeks to evict your tenants and months to sell your property?
Cash buying companies will buy any house, in any condition, including tenanted. You’ll get an idea of an estimated price on the first call, a firm offer after they have carried out their valuation process and they could buy the property in as fast as 3 weeks, this is without a doubt the fastest way of selling. There’s none of the uncertainty of an auction, none of the legal hassle of evicting tenants and no waiting around for a traditional buyer. What’s more, there’s no estate agent fees to pay, and they’ll even cover your legal costs.
There are other benefits of selling this way, you won’t have to put the property on the market because they will purchase your property directly. This means fewer people having to enter the property. Also since they will be taking over the tenancy it is in their best interest to keep a good relationship with your tenant.
“Selling to a cash buyer gives you speed and certainty, so you can stop renting and start your retirement”
One of the cons of selling this way might not get as much money as you might get by selling a house with tenants in other ways, but you won’t have nearly as much stress either. If you’re looking to get out of the landlord business because of all the rules and regulations, the last thing you want is to have to jump through a whole bunch of legal hoops, for months on end, in order to do so. With a cash buyer, you’ll be on that beach before you know it enjoying your well-earned retirement from the rental game.
By selling to a cash buyer, you’ll get a fair price, fast and without the stress of a lengthy sale, they will be purchasing the property from you directly. Depending on how long you have owned the property the reduction in price could easily be offset by the increase in value of the property over the time you’ve owned it. And if you’re looking to get out of the rental market completely before it gets completely tied up in red tape there are companies that will buy your entire rental portfolio.
That sex on the beach could be a lot closer than you think – or any other cocktail you might fancy spending your retirement funds on!
Top Recommended House Buying Company For Landlords
Not all house buying companies will buy property tenanted and there are a lot of companies out there that you should avoid, we should know we’ve reviewed most of them! Luckily our top rated buyer deals with purchasing buy-to-let properties and specialise in tenanted property sales and we have worked with them to get a direct line especially for landlords. If you are interested in exploring a house buying company as an option, call today to get an estimated cash offer.
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Option 2: Sell to another landlord looking for sitting tenants
If you’re faced with selling a tenanted property, the obvious option is to sell the property to another landlord. This avoids all the hassle of evictions, and since the tenant will remain in the property it means that you will continue to get rent right up to completion day. Landlord buyers often prefer to buy a rental property with sitting tenants, as it saves them the hassle and costs of finding and vetting tenants of their own, and they get rent from the day they take possession.
“Selling to another landlord is a good idea – IF you can find one!”
Unfortunately, this type of buyer is hard to find, and with all the new rules and regulations, they’re getting scarcer all the time with almost one in five landlords looking to sell there is a constantly shrinking pool of people looking to invest in the private rented sector. Most high street estate agents don’t specialise in selling homes with tenants (see option 5 for more details), so your choice of agent will be limited, and less competition inevitably means higher prices.
Even if you can find a landlord interested in buying your property you’ll also have to pay more for your conveyancing when you sell tenanted property, to cover the extra costs of transferring the tenancy and the deposit to the new buyer. This will add even more time to an already lengthy transaction. Instead of sitting in the sun enjoying your money, you’ll be sitting in your solicitors’ office, not enjoying yourself at all.
Case Study – The dangers of exploring the wrong options first
We recently spoke to a professional landlord, let’s call him Dave. Due to the new regulations Dave and his business partner, who own multiple properties together, are looking to offload some of the rented properties that they deem no longer viable. They decided to sell on the open market with the tenant in situ and found a landlord willing to buy. The problem was that the new landlord and the existing tenant couldn’t agree on terms and after months of negotiating the sale fell through.
Worried that this would happen again Dave and his business partner decided to take back possession of the property and sell with vacant possession. After a costly eviction through the courts the property is now a liability on their books and they are looking to fire sell it, marketing it for significantly less than what it’s worth to get it off their hands quickly which is still proving difficult in a slow market.
It was at this point that they decided to call a house buying company. If they had made that call at the start of all of this they would have had the property off their books months ago, wouldn’t have incurred any eviction costs and wouldn’t be making mortgage payments out of their own pocket.
It costs nothing to get an appraisal from a house buying company and knowing your options upfront could save you time, money and stress in the long run.
Option 3: Selling a tenanted property at auction
One option to speed things up is to sell your tenanted property at auction. Auctions attract many more investors and landlords, so you could have more potential buyers for your property. Unfortunately, there’s just no way of knowing who will turn up on the day or how the auction will pan out.
“Selling at auction can work, but it comes with a lot of uncertainty”
It’s nice to think that your property could be subject to a bidding war, increasing the price to more than you expected. In reality, it is just as likely to not attract any interest at all. As many as 30% of homes fail to sell at auction, but their owners still have to pay listing and marketing fees. Even if you do secure a sale on the day, there’s no guarantee what price you will get, and your fees will be much higher than for a traditional sale.
Option 4: Selling a tenanted property to your tenants
The obvious route for selling a property with tenants is to offer it to the tenants themselves. This can work out well for all concerned, with no estate agent fees for you and no moving costs for them. For many properties, the monthly mortgage payment will be less than the rent, so it will be very affordable. That said, if your tenants could save a deposit and secure a mortgage, they probably wouldn’t be renting in the first place.
“Selling to your tenants looks easy, but it can be quite complicated”
If they are in a position to buy and thet are interested in purchasing the property, sitting tenants will often expect a discount in return for a quick and easy sale. If they don’t get one, then they can sometimes make it awkward for you if you try to sell to someone else by making viewings hard to arrange and not presenting your property at its best. In this case, it can be easier to evict and find an independent buyer at a better price, than it is to try to sell a property to your tenants.
Option 5: Selling through an estate agent – will they sell a property with sitting tenants?
There are some traditional estate agents with experience in selling tenanted properties. However these are few and far between and will generally charge a higher fee for doing so due to the added complications of the process of selling a tenanted house. Estate agents are not necessarily fans of selling an investment property with a sitting tenant because it narrows the market significantly as most buyers are looking for properties for themselves, even some potential landlords would rather buy with vacant possession and find a new tenant themselves.
If you manage to find an agent able to sell the property they are unlikely to do much more than market your property on a property portal and hope for the best. Also with an open market sale with vacant possession likely to take at least 4 months, you can probably double that looking to sell on the open market with a tenant
Things to bear in mind when selling a tenanted property
Even if you plan to sell your property with the tenant in situ the tenant could still take exception to the change, and potential uncertainty it might bring, and make things difficult for you to market the property for sale.
It is not unheard of for tenants to be awkward and disruptive when it comes to things such as viewings, arranging times and then canceling them last minute or just blatantly refusing to give access to the property. This can slow down or even kill potential sales.
If you have more than one tenanted property that you are looking to sell the difficulty in selling is multiplied. Luckily there is a solution for portfolio landlords, you can read our article selling a property portfolio for more information.