Selling a property to the tenant

FlorayG

One of my tenants has expressed an interest in buying the house she lives in. I was thinking of selling it in the next few years anyway, so I'm considering it.

What would be a sensible and fair price discount to offer her in consideration of this deal saving me huge costs on estate agents, eviction, preparing house for viewing, paying all the bills and maintaining it while waiting for a buyer and all the other headaches?

Obviously this is for us to agree ultimately but I'm interested in other landlords or tenants opinions

silvercar

Estate agents usually charge 1-2% of achieved price.

Whereas there are plenty of stories of eviction headaches, most tenants leave in a reasonable manner.

Prepping a house is optional, loads of people sell as is, particularly as you may not achieve higher prices just by prepping. And any costs you do spend may not result in a profit on those costs, particularly as you will be within the scope of CGT.

Bills and maintenance is variable, you don’t know how long it will take to sell on the open market. You’ve said yourself you are only selling because the tenant suggested buying, so arguably you would carry on renting if they weren’t buying.

I’d be prepared to discount by a small amount to reflect all of this. Far more interesting is how you arrive at a selling price. Decide on a higher price and give a bigger discount may seem more agreeable to the tenant than a price for a quick sale with little discount.

subjecttocontract

When I've done this in the past I've established the market value by EA valuations or sale prices of similar properties and then discounted the EA fees.

GrubbyGirl_2

I sold my house to my tenant as I was renting elsewhere having moved and not wanted to commit to buying at that point. I got 3 estate agents to value it - took the middle value and discounted it by the estate agent fees. I was completely open with the tenant as to how I had come to the value and even shared the valuations with him. We were both very happy with the way we did it.

Saved a lot of hassle and expense prepping the house for me

sherlock228

let the EA's bear the cost of doing valuations with no prospect of converting them into sales income.

As others have said, that gives you a "paper" trail of the value which you then discount by at least the EA fee and at your discretion, given local market, a tad more if buyers are completing at under asking in your area (easily checked by looking at Rightmove asking and sales histories which I would expect the tenant to do to inform themselves anyway )

sheenas

I would get three estate agent and use the average market price. I don't see the need for a discount. Both parties have a vested interest and will gain from the deal as-is.

saajan_12

Do you have a lettings agent for the tenant - often their agreement with you has a clause that they get some fees if you sell to the tenant they originally found. If not, yes you're saving the agents fee which is usually 1% + VAT. Preparing house is generally inadvisable and bills are minimal if its empty, eviction costs is claimable from the deposit. So its really the rental void + CT you're saving - hard to quantify as it depends on how long it takes to sell.

Meanwhile the tenant also saves moving costs and an overlap in rent at both properties, as the dates rarely line up.

Same reason the seller could pass on their savings, so could the buyer.. I'd offset the rental void / bills with the moving costs and overlap in rent. That leaves the agent fee, which I would deduct for if actually saved (see above). Total 1.2% (inc vat).

theartfullodger

Indeed: Treat tenant like any other buyer. No deals, no favours. If he doesn't like it put it on the market & give notice .

Bigphil1474

I'd bear in mind that in some areas right now, buyers are like hen's teeth. Depends what you want out of it, but I'd go the 3 valuations and pick the middle one route, knock off 3% or a fixed amount for an easy sale, and job's a good un.

Herzlos

I'd at least knock off 2% for estate agent fees and 12 months of whatever you think an empty house will cost you (council tax, insurance, bills, lost rent).

FlorayG

https://forums.moneysavingexpert.com/discussion/comment/82137249#Comment_82137249

That sounds like a good starting point.

Everyone is responding talking about the financial cost, but there's the mental hassle to consider as well.