Selling to a neighbour without going to market - pros and cons?

nicknameless

We currently own our flat and are in the process of purchasing a house.  The house purchase is not dependent on the sale of the flat and we had intended moving and then marketing the flat.  However, a neighbour has expressed an interest in purchasing the flat.  They were going to buy another in the block which is becoming available but ours is preferable to them.

Obviously this would be without going to market.  We have considered this and in many ways it could be beneficial if they pay market value.  No hassle re marketing, agencies, viewings etc.  They know the block so know what they are buying into, so unlikely to be any issues around changing mind etc.  Potential to save agency fees and hassle.  Timing would probably mean we can move the flat on quicker than previously anticipated so potential for less overlap in terms of owning the flat and new house.

I need to find out about their position in detail and if they are still interested work out how we would mutually establish market value. I have a rough idea from recent sales but would perhaps get 3 agents in to value to get a better idea.  Perhaps could suggest going with average of these if they differ?

Is there a better way to value?

Am I missing any important considerations?

Many thanks in advance.

simon_or

If there's sufficient data and the property is fairly standard, recent sales would be the best way to arrive at a 'value'.

As a seller you'd probably get a better price by averaging EA valuations but as a buyer you may think it's inflated.

I'm guessing they're buying to let?

nicknameless

simon_or said:

If there's sufficient data and the property is fairly standard, recent sales would be the best way to arrive at a 'value'.

As a seller you'd probably get a better price by averaging EA valuations but as a buyer you may not like that.

I'm guessing they're buying to let?

I need to establish in detail their situation.  They are buying to live in it.  I am not sure if they are renting their current flat or selling it.  I know they have someone who is 'having it' but I didn't establish in detail at first conversation if that is rented or sale.

ProDave

We sold a house to a neighbour once.  It was the only sale I have ever had that went swiftly, smoothly and without any problems whatsoever.

We had verbally agreed on a value based on recent sales, but the buyer insisted on a professional valuation, and that came back at a slightly higher value so that is what she paid.

k3lvc

ProDave said:

We sold a house to a neighbour once.  It was the only sale I have ever had that went swiftly, smoothly and without any problems whatsoever.

And to counter that we did as well - and it degenerated into me posting the keys through the door on completion day as they were no longer talking to us (or each other)

Glad we were moving to other end of the country

But that said it was at the time of the £250k stamp duty threshold and we netted £250k with no EA fees and they got what they wanted (even though they bought it as end terrace wanting to extend the terrace into their new garden and never did get planning permission lol)

SDLT_Geek

nicknameless said:

We currently own our flat and are in the process of purchasing a house.  The house purchase is not dependent on the sale of the flat and we had intended moving and then marketing the flat.  However, a neighbour has expressed an interest in purchasing the flat.  They were going to buy another in the block which is becoming available but ours is preferable to them.

Obviously this would be without going to market.  We have considered this and in many ways it could be beneficial if they pay market value.  No hassle re marketing, agencies, viewings etc.  They know the block so know what they are buying into, so unlikely to be any issues around changing mind etc.  Potential to save agency fees and hassle.  Timing would probably mean we can move the flat on quicker than previously anticipated so potential for less overlap in terms of owning the flat and new house.

I need to find out about their position in detail and if they are still interested work out how we would mutually establish market value. I have a rough idea from recent sales but would perhaps get 3 agents in to value to get a better idea.  Perhaps could suggest going with average of these if they differ?

Is there a better way to value?

Am I missing any important considerations?

Many thanks in advance.

If they are able to complete the purchase of the flat before you complete your house purchase (or at the same time) then this would save you having to fund the extra 3% stamp duty land tax on your purchase.

canaldumidi

The key is agreeing the price. If you can do that amicably then that's fine. Options include

* paying an RICS surveyor for a Valuation report

* getting 3 estate agents round and averaging the valuations (mean? medium? mode?). But bear in mind EAs sometimes over-value to encourage you to use their services!

* looking at the asking prices of other similar local flats on the market

* looking at the sold prices of other similar local flats that recently sold

* comparing against the buyer's mortgage lender's Valuation

* thinking of a big number and doubling it. Then wait for buyer to think of a small number and half it. Buy a cake and spend an hour haggling over tea till you meet in the middle!

motherofstudents

We sold a house this way when relatives of the next door neighbour wanted to buy. It actually proceeded very smoothly and much more quickly than any other sale we’ve had.  Of course that won’t always be the case. Just got a couple of estate agents round and the buyers agreed the price.

Woolsery

Try the formula a friend of mine used. Get 3 agent valuations, pick the highest and then add £10k.

It worked for her!

badger09

If you know them, they are serious about buying & can afford to do so, I don’t think you have anything to lose. You’re not dependent on the sale for your onward purchase so can give them a chance. 

It should become obvious fairly quickly whether they are serious or not. If they mess around, simply put it on the market. 

When my sister died I was approached (as executor), with inappropriate haste, by a friend😏 of hers who was ‘desperate to buy the house, to escape an abusive marriage’. As I hadn’t even applied for Probate at that point, we agreed a market value price, (she showed me an S&S ISA statement) and exchanged contact details & details of solicitors. 

No contact for a few weeks, then the excuses began: she had lost her phone, she was on holiday so couldn’t do anything, she had to change solicitor as she didn’t want to use the family’s solicitor, husband was ill so she couldn’t do anything about the house etc etc 

I put the house on the market with a local agent & agreed a reduced fee if this woman proceeded, as I wanted him to do any ‘chasing’. 

Turns out she was well known by all the local agents, and was banned by some, as she had been doing this sort of thing for many years. I’m sure that’s an extreme example but it doesn’t always go smoothly. 

Good luck

movilogo

Go for it, after the sale neighbor won't be your neighbor anymore anyway 
Anything that avoids low life estate agents, is always a good thing.