5 Steps To Ensure a Smooth Sale of Your HMO

Buying and selling property can be complicated, frustrating and take too long, and it may seem on the face of it, buying and selling investment properties should be easier. Normally there’s no chain , and the parties  are more than likely experienced in these types of sale, but, still there are some significant pitfalls to be avoided.

Our resident investment property sales expert Stephen Haigh has put together some great advice to help you make sure your sale or purchase goes as smoothly as possible.

1. Getting the valuation right

Selling an investment property is more like selling a business than selling a home. When standard estate agents value a property will look at comparable properties and recent sales alone to try to assess value and they may well miss important factors which may enhance the value of your property.

HMO properties can offer potential for development or improvement to increase revenue for ingoing buyers, knowing where these potential enhancements are possible and a rounded understanding of their impact or not, significantly impacts market value.

Also key, is an on-point knowledge of changing market factors such as return on investment percentage calculations and rental capabilities. Experienced investment property agents are able to help potential buyers understand the investment opportunities.

2. The right marketing

Frustratingly, most HMO properties are advertised for sale with incomplete or no details of tenancies or income which is frustrating for potential investors who need to understand in detail, the anticipated financial outcome of an investment and the required strategy for successful and profitable future letting.

A specialist agent will not only make sure the information investors need is provided, but that it’s put in front of the right people; specialist agencies like Purple Frog serve the investment market and that keeps us focused on the right detail. It also means that our marketing is pinpoint and our mailing list is 100% built from investors.

What’s more, to reach the fullest market, consideration has to be made for individuals who live a distance away from where they want to invest. This applies to the wider London and South East market as much as it does to buyers that are based abroad.

In order to effectively sell to these markets, there needs to be clarity of information, from where trust can be built. We’re particularly proud to be constantly forming good relationships with companies and individuals that find it difficult to personally view property or easily understand the investment from a distance.

3. Conflict with Bank/RICS valuations

Banks and surveyors don’t value properties the same way property investors do; they have to value a property based on what they think it would sell for if it was not an investment property; in most cases, and particularly with HMOs, the valuation provided by a bank or RICS surveyors will be lower, sometimes significantly, than the sale price agreed. This can lead to renegotiations or collapsed sales if not handled correctly.

The team at Purple Frog ensure buyers are aware for the potential for undervaluation and rather than asking for the standard proof of funds at a rate of 25%, we ask for higher or appropriately tuned proof of funds to overcome low bank valuations and to incorporate stamp duty costs.

If a buyer can’t bridge the gap between a valuation and agreed sales price, then they are no longer able to proceed with a purchase. We anticipate all of these factors to avoid wasting the time of our clients and investors.

4. To let or not to let

The single biggest mistake we come across is property owners being told they must have vacant possession before selling their property.

Whilst this may be true in some cases, for example where the property is worth more to an owner occupier than a property investor, in many cases, if you have good tenants paying market rent, your property will be more attractive to property investors.

We look at your sale in every detail and agree actions with you to suit you and your market.

5. Article 4  – certificate of lawful use

When a property is situated in an Article 4 area, most lenders require evidence, normally in the form of a certificate of lawful use (COLU), that a it has the right use class. It can take three months or more to secure this with the local authority.

It’s vital to resolve this at an initial stage to ensure best price and avoid lost sales.

What really matters: The right agent

When selling a property, you need to know what investors see when they view a property. What is the potential? What will planning allow? What will future rental income be if a property is developed? What is the cost of that development?

Our expert valuation process understands the view of the buyer, be it faults, issues or potential.

We like to know as much as we can about our investors, their provenance and history is important information to us. Understanding and qualifying buyers with a specialist insight avoids any number of issues that could occur during a sales process.

At first point of contact with the Purple Frog sales team, you are speaking to an expert specialising in the sale of investment properties.

Call us on 0333 003 2211 or email sales@purplefrogproperty.com to speak to one of the team now.