Should I sell to my tenant?

Lottir

(Posting for a friend who doesn't have an account)

We have been renting my old 2 bedroom flat to  tenants for about a year now. We knew when we started renting to them that one of them was looking to buy a house in the near future. I dont hugely love being a landlord but they are good tenants who dont cause any problems.

The reason we let out the flat instead of selling it was because we couldn't get any buyers at the £220000 it was valued at. About 6 months ago I offered to sell the flat to one of the tenants for £20k but they said the highest they could go was £187000.

Last week the tenant got hold of me and asked if I would be willing to sell for £193000. I would like to sell and by doing it privately to sitting tenants I would save on commission fees and hassle. But it is a massive drop from £220000. Now I'm wondering if I should sell to the tenant or put the flat back onto the market to try and get a better price.

Sachs

What makes you think its worth £220k?

Did an Estate Agent come round and say 'Hey, sell it through me and not the other guys and I'll get you £220k!'

Based on local sales similar to the flat that you have seen recently how much do you think its worth?

Norman_Castle

If they're looking to buy its unlikely they will remain as tenants for long. No takers at 220k suggests an optimistic valuation. As above, how does the price compare to recent similar sales?

How much commission is there on a 200k sale, 2.5-3k?

Lottir

The only property to compare to is the flat next door which went for around £185k. That was a upstairs flat with no garden  whereas mine is a downstairs flat with a garden and decorated to a much higher standard.

Cakeguts

Lottir said:

The only property to compare to is the flat next door which went for around £185k. That was a upstairs flat with no garden  whereas mine is a downstairs flat with a garden and decorated to a much higher standard.

The decoration doesn't make any difference to the sale price because that is your taste and the new owner will most likely redecorate to their taste so you don't get extra for decorations.

You have a garden but some people don't like ground floor flats because of the security so I think you could value it at the same as the upstairs one that sold and be realistic. 

If you can't get the price that an estate agent has valued a property at that means that the valuation is too high. A property is only worth what someone will pay you for it and it looks as if that amount is the same as the one that has sold.  In which case it would be a good idea to accept the tenant's offer.

tacticalbanjo

One thing you might want to consider when selling to your tenants is that they'll be paying rent right up until completion. If you sell to someone else you will most likely have to have a void period - I would insist the tenants were gone before exchange and so would plenty of others to avoid becoming a landlord if the tenants stayed until evicted by the courts as is their legal right. 

AdrianC

So an £8k premium for + garden/- ground floor. Sounds eminently reasonable.

Stubod

...sell sell sell...to your tenants and save yourself a lot of hassle and potential cost...at least that's what I would do...

(OK so you "think" it "may" be worth more, but would you actually get your asking price?...buyers market?)

franklee

Lottir said:

About 6 months ago I offered to sell the flat to one of the tenants for £20k but they said the highest they could go was £187000.

Last week the tenant got hold of me and asked if I would be willing to sell for £193000. I would like to sell and by doing it privately to sitting tenants I would save on commission fees and hassle.

So you offered to sell for 200K they have offered 193K, so difference of 7K. How do the figures look?

Estate agent fees what 2-3K?

You don't say what the rent is so I've guessed approx. 5%, so 850 per month.
Let's be optimistic and say three months void time if selling to someone else, lost rent 850*3=2,550

Extra profit if selling to someone else at 200K:
Price difference - Estate agent fees - three months lost rent
7,000 - 3,000 - 2,550 = 1,450

Is 1,450 or thereabouts worth trading for hassle free certainty? Your mileage may vary.

Lottir

franklee said:

Lottir said:

About 6 months ago I offered to sell the flat to one of the tenants for £20k but they said the highest they could go was £187000.

Last week the tenant got hold of me and asked if I would be willing to sell for £193000. I would like to sell and by doing it privately to sitting tenants I would save on commission fees and hassle.

So you offered to sell for 200K they have offered 193K, so difference of 7K. How do the figures look?

Estate agent fees what 2-3K?

You don't say what the rent is so I've guessed approx. 5%, so 850 per month.
Let's be optimistic and say three months void time if selling to someone else, lost rent 850*3=2,550

Extra profit if selling to someone else at 200K:
Price difference - Estate agent fees - three months lost rent
7,000 - 3,000 - 2,550 = 1,450

Is 1,450 or thereabouts worth trading for hassle free certainty? Your mileage may vary.

I didnt really think about it in terms of lost rent. I assumed people would look round while people were still there and then maybe I'd have one month with no rent coming in. But I can see how it could be a factor.

jennyrenter

In your place I would go for it!