Selling house with (good) tenants in situ

[Raisinbrain]

Has anyone done this? Are there specialist estate agents that deal with investment buying/selling? Any tips?

I did it privately and you have to take a hit on the price. This was 10 years ago and the tenant is still there so seems she still is. The only thing I remember being different was the solicitor had to modify the paper work slightly and estate agents wanted vacant possession due to the difference in price (it was about 20-25 thousand different. Was told we could get 220000 as a top price but I think more realistically 215000 would have been achieved. Sold it for 195000. The market was still raising at the time but 3 months later the crash came. My other rental due to location and the massive difference in price which we couldn't afford selling with tenants in, we sadly had to do a section 21 but the letting agent we use found them a lovely cottage up the road and we released them from their contract early so they could get it. I think this was the fairest way round it, we had agreed flexibility so say they had taken some time find somewhere we were happy to wait. I know a lot of people and landlords might have felt differently issued a section 21 and moved to the courts swiftly but I think the important part of your post was they are good tenants and having been on the receiving end of a section 21 last year it is horrible and costs the tenants thousands, we lost our whole deposit as well as removal costs and finding a new deposit we had been in the property 6 years and some of the costs were a joke. We then had to move again within 8 months and the new letting agents did the same trick but I was a bit wiser that time and the deposit people found in our favour and agreed with my costings mainly in fact they would have got more if they had agreed with me 😂 I see to many people treated badly by landlords. We are looking to get rid of our last rental soon and the tenants are moving at the end of their lease next month their choice and what prompted this sale.
We are happily no longer renting as it makes you so vulnerable to the whims of others.

So having just re read this the one thing we did with everyone of our tenants was arrange to go round, (we did periodically to discuss work we wanted to do so not unusual) told them we needed to sell and why and they all gave the feed back so 2 and 3 both said they would rather move and number one was upset at the thought of moving, and put me in touch with her previous landlord who was happy to have her back.
So I suppose my advice would be have a chat they might just decide they want to move and that will be so much easier for you.

I have bought with (good) tenants in situ.

Legally no problem. The tenants just had to sign some tenancy transfer thingy.

I bought through a high street agent. Such purchases are not uncommon here where there is a strong rental market catering for reliable but low paid workers in the hotel and care industries and a lot of sixties block of flats. I saw some very well looked after properties.

Three things:

1. Talk to agents. Have they sold tenanted properties in the past. What is their experience. Insist that they only show interested and qualified buyers round.

1. Talk to the tenant. Say you want to sell but first want to give a good shot at selling as tenanted property. You will need their help and cooperation. I was lucky when buying as I bumped into the tenant pushing a buggy shortly after her viewing. They really did not want to move as they were saving hard to buy their first property. I was able to reassure her that having someone in situ for a couple of years would be perfect for me.

1. There may be a hit on the price. Not in my case. The previous owner offered me vacant possession so felt no need to drop the price. However he did accept a slightly low offer as he benefited from rent up to the day he sold, and no hassle/risk. And I had rent from day one and lovely tenants so was also happy. (And the agent, who was also letting agent, seemed to be keen to help the tenants.)

So if there is a reasonable market for investment property, give it a go. At the very least, even if it does not work out, your tenants will know you tried. On Right Move such properties will often say 'generating an income of..'. Investment buyers only in contrast can be code for an unmortagable property: dodgy lease; structural problems etc.

Hi Raisinbrain

I have sold with tenants in situ, why are you selling the property?

The more detail you can provide will help in formulating a plan.

Have you asked your tenant if they are in a position to buy the property? My landlord didn't tell me the house was being sold - it was offered to other landlords at the same agency. Luckily the first sale fell through, and I could put my case forward to the landlord and actually buy the house. Worth a shot!

Thanks so much some very useful info!

Plan A is definitely to ask the tenants if they're interested, it would be great to be able to sell it to them. Plan B is to sell with them in situ to minimise disruption to them and keep the rental income coming in. Willing to give them some incentive/compensation for viewings etc. Not sure what the price difference would be, I suppose we need to talk to some estate agents to find out what the market's like in the area. it's within commuting distance to London so hopefully not too bad.

The house was our first and only property and our home for years before we moved abroad. Want to sell now as we'll never move back there and we want to buy a place for us to live in.

In your situation I accepted an offer from the tenant. My letting agent dealt with all the discussions with them on my behalf under instruction.

Selling to tenants is a dream if you can agree a price and in my experience, its the buyer that knows how much a property is worth and up to the seller if thats enough to let it go. Estate Agents will overvalue properties to get the instruction (often by crazy amounts) so ideally you need at least 6 valuations and historic data to get fair value. You will obviously save 1-3% on any fees and hassle selling to tenants and you also avoid the timewasters who offer asking price then renegotiate after a survey, or agree a price and keep on offering on other properties.

If you want a true valuation, pay a few hundred quid for an independent surveyor.

Selling a property can be hard work (just look at these boards) and in your tenants you have a very rare opportunity for a hassle free sale. For me, thats worth alot more than 1-3% off the average. If keen, I would take a hefty decent discount than go through a nightmare of flakey chain buyers.

I have a house with tenants at the moment, and need to do ‘something’ with it (either move back in or sell it). I’m not sure if it’s just my area, but I was advised not to sell with tenants in situ as the new landlord could just evict them anyway (and I’d have taken a hit on the purchase price). I’m guessing it might be different in other areas?

If I sell, my ideal would be to sell to the tenants if they can get a mortgage - they’ve been great tenants and I feel guilty about it anyway. I don’t need to do anything right now, so I’ve still got time to think!

The only major problem with selling with tenants in situ is that you are limiting your market. Lots of buy to let investors are getting out due to the tax regime changing and it might be difficult for you if most buyers actually want to live in the house. Finding any buyer can be a challenge. Finding a buy to let buyer could be an even bigger challenge but get advice on your area. However the new owner can serve notice on the tenants but most people want to actually move in when they buy so they might not consider buying your house.

Is it possible the tenants can afford it? If they have a decent deposit, they might have a good enough income to proceed but you have to be realistic and you cannot assume they can afford it. Some people like renting!

Nothing wrong in offering to the tenants. I forgot that that has always been our kicking off point become they never have been in a position to. I understand the idea of limiting the market but if they do want to buy you have an incredibly motivated buyer. They want to save moving costs, new deposit and want to make sure they get it, they will also want to (normally) complete quickly as every month not completed is another's months rent.

I still can’t see what the problem is, other than estate agents wanting an easy life. Lived in homes, if they are kept clean and tidy usually present better than empty ones. Agents normally hate having to deal with tenants, but this is not the case if tenants are supportive. .

So. Speak to your tenants and ask if they are interested in buying. Offer them a price which is at the lowing end of what you would accept minus agents fees. You are better off as you have rent through to the end, motivated buyers and no hassle.

If not ask if it is ok to market with them in situ. Then be very clear to agents. You want to keep tenants on side, so viewings only to qualified and interested buyers only, and respectful of tenants wishes. Explain that a BTL buyer would be ideal.

I can’t see why a BTL buyer would expect a discount. Starting with good tenants in place is perfect. And the legal stuff is not complicated. And if the buyer wants vacant possession, you get this before exchange...giving a bonus to the tenants if they have been helpful.

DH bought his first house as a tenant. It was brilliant as the landlord let him keep all the furniture etc so there were no initial move or furnishings costs. And the landlord did not have the hassle of disposing of stuff. DH was also able to keep his flat mates, receiving rent from them.