Advice when selling a flat with cladding

leumas

We live in a 2 bed London flat which we purchased as a new build in 2016. It failed an EWS1 survey in Nov 2020, and although remediation works were planned for this year, they have been paused while a peer review of the EWS1 is being carried out, in the hope of having the rating improved to a B1 rating, or signs of possible negligence in the original build for which we may be able to make a claim through the building warranty. The property is under 18 metres so the EWS1 is not technically required to sell, however most lenders are still not willing to loan due to the EWS1 failure. So in summary the situation is still quite fluid, and in the meantime we have quite a high service charge due to the increased insurance (~£300/month).

Many flat owners are looking to sell, especially due to most flats being purchased on HTB which now requires increasing annual fee payments since 5 yrs have passed, however most flats listed have failed to sell and there is currently just one 3 bed flat still listed. Some flats found a buyer, only to fail at the point of getting approval from the HTB authority for the sale. 

We have paid off the HTB cost in a remortgage so are free from their restrictions, and are now wondering if we should attempt to beat the rush by listing and trying to find a buyer in the next few months. We have heard that an equivalent flat is currently under offer from a cash buyer (7 months after listing).

We are not in a desperate rush to sell but would like to sell this year ideally, and are concerned that as soon as the cladding issue is resolved in some way there will be a rush of 20+ flats on the market at a similar time, driving down all our prices considerably.

We have heard of some sellers offering a guaranteed amount to cover any future cladding costs up to a certain limit in escrow, to ease the concerns of buyers, and wonder if this is a popular/advisable tactic.

I'm also wondering if anyone on the forums has advice for:
- Whether there are any downsides to selling before the cladding issue is resolved (other than selling at a discount)
- How we can best find a cash buyer that is willing to purchase despite the issues
- How we can try to get the best price for the property considering the issues, we would be happy with anything in the region of what we paid for it 5 yrs ago but wouldn't be willing to sell for a considerable loss (20k+ from our purchase price)
... or any other advice from anyone who has been in a similar situation or knows of others who were. Thanks in advance!

K_S

@leumas Quick thoughts -

- if there is any chance of that review will end up in a B1 rating, then it might be worth hanging on and waiting for the outcome.

- if you know your price-floor and there's no chance of a B1 rating, then it may be worth putting it on the market for cash-buyers only and seeing what kind of offers you get. Going with a traditional estate agent, this shouldn't involve any upfront cost for you.

- I personally haven't come across the escrow option mentioned, but those purchases wouldn't be using a mortgage anyways.

- overall, to get the 'best price', you want to avoid being in the position of forced to sell. So unless you have a pressing reason to exit now, it might make sense to see how things pan out before trying to sell the flat while it's effectively unmortgageable.

leumas

Thanks @K_S - so do you think a better price would be achieved competing against several other similar flats but post any cladding issues and to the full market versus to just cash buyers with cladding issues but with no other similar flats on the market?

K_S

@leumas Your guess is as good as mine There are risks either way.

But personally, if I were in your place and there was no urgent need to sell, I would look to hold out until the property is mortgage-able.

leumas

K_S said:

@leumas Your guess is as good as mine There are risks either way.

But personally, if I were in your place and there was no urgent need to sell, I would look to hold out until the property is mortgage-able.

Thanks - may I ask what the main reasons for that would be? Are there downsides to listing sooner on the off chance that we find a cash buyer with a reasonable offer? 

K_S

@leumas From experience, the kind of buyers who have sufficient cash in hand to buy a London flat without a mortgage are likely to be much savvier and less likely to overpay than someone looking to buy the flat to live in using a mortgage. Plus, you are likely to be competing with a lot of forced-sellers who are desperate to get rid. At least that's how I see it.

Having said that, as a seller you are in the privileged position of being able to put the flat on the market for cash-buyers only without incurring any significant costs. If you really want to sell and have a clear idea of your price-floor, then you might as well give it a shot and see what offers you get. Perhaps you will get close to what you are looking for, who knows.