Options for selling an inherited property in need of complete renovation

[confusednw]

Hello everyone,

I recently inherited a property that I plan to sell (probate received).

The property is in need of complete renovation so it will likely be purchased by an investor/developer/builder. Realistically, the condition of the property will not appeal to most ‘normal’ buyers because of the amount of work involved. However, the property size/location means it has good potential for the right person.

Three estate agents have valued the property in the range of £195k to OIEO 220k. If renovated, they estimate it could be worth up to £300-315k.

Two agents recommended the sale via the traditional route (i.e., through the estate agents); the other agent recommended the sale via the modern method of auction (MMoA).

The traditional route should allow it to sell for market value. My main concern relates to what a survey might find and the negotiations that ensue (i.e., would this lead to a 5-10% reduction of the agreed price)...

The modern method of auction would limit the number of potential buyers and it would likely sell at below the market value. The uncertainty around the survey seems less of an issue with this method and a sale might complete more quickly. However, there seems to be a general negative opinion of MMoA, because of the financial benefits it brings for the agents/auctioneers rather than the buyers/sellers.

Has anyone sold a property in a similar situation or condition? If looking to sell to an investor/developer/builder, which option would be favoured?

Any advice or experience is welcome!

I sold my DFs property via an EA, it received 26 offers at closing date and we accepted an offer of 10% over value. My DF had done very little work to it in the 32 years he lived there (blue bathroom suite, wood panelling, no central heating) and it sold to a developer who flipped it then resold following renovation.
However, this was about 3 years ago so a very different market to now.

I will be selling my DMs house as soon as I can - the EA who valued it said not to bother with any renovations - it needs a new kitchen, decorating throughout and some very dodgy 1980’s fitted wardrobes replacing. He said the cost of the renovations to me would not be reflected in the price we would likely receive even if we did the work ourselves (😂) and to just put it on the market as seen.

The traditional route should allow it to sell for market value. My main concern relates to what a survey might find and the negotiations that ensue (i.e., would this lead to a 5-10% reduction of the agreed price)...

Last time I got a L3 quote on a house worth less than that, it was £900 (and this surveyor is in the medium to pricey bracket). What if you get the survey done, and provide it to all prospective purchasers? That way, you can make it clear that only realistic offers will be considered, and put the onus on them going away and doing the maths on what's realistic, rather than them gazundering you three months down the line when they discover the refurb will cost 80k.

However, there seems to be a general negative opinion of MMoA, because of the financial benefits it brings for the agents/auctioneers rather than the buyers/sellers.

Hell yes. They charger the buyer 6k, the seller 2k (I think) AND get to do an absolute ton less work. Added to that, it's binding. In an era of mortgages getting pulled left, right and centre, deals that have to be done in 55 days or whatever it is MMAs insist upon are extremely risky.

I'm not convinced there's an abundance of developers out there prepared to spend the kind of refurb money you're talking about atm. Their lending will be more expensive than most people's mortgages as of this week's rates, and why would they do that when they can wait 18 months and potentially get their doer-uppers for 30% ish less money?

Have you considered a different option - renting it out for 5 years, doing it up yourself slowly over time and selling it when the market has both dipped and risen again?

It doesn’t sound like it’s in a rentable condition, you would need to bring up to standard for the energy rating. Plus how can one do work on a property whilst it is rented out. Then even if it does go up in value you have to pay capital gains.
I would give it 6 months with a local estate agents and only if unsold consider other options.

Is it mortgageable or are we talking REALLY bad?

Does it have… charm (is it period and is anything left of any features)?

If both of those are yes, sell via an EA.
If both no then put it with a real auction house and a developer will take it.
If one yes one no, I’d give an EA a shot and auction if it doesn’t work.

the idea of getting a survey and presenting it to potential buyers before they offer is a good one too.

Thanks for your thoughts - getting the survey done could be a good option here.

EA's were suggesting £40-50k in renovation work, but my feeling is it could be a bit more.

Unfortunately, renting would not be an option due to the current condition + plan to use the proceeds of the sale for another house purchase in a completely different location.

I'd sell through a normal EA. I probably wouldn't have a survey done myself, as the potential buyer will still need their own - the contract is between the surveyor and the person who instructed them. They won't be obliged to share it with you, but if they expect to renegotiate, it will be in their interest to do so. Then you can decide if their request is reasonable.

You are in the better position, as they'll have spent the money and it's not as though you're relying on the sale for an onward purchase. Often gazunderers use that fact to their advantage.

40-50k doesn't seem like a huge amount for a complete renovation, especially at the moment. How big is the property. Is it a house or flat?

I would avoid auction unless I really couldn't shift it.

We sold my in laws house in 2020, very old fashioned, needed new bathroom, windows, doors, garage door, boiler and decorating throughout. We were going to do bathroom and boiler as DH is a plumber so would just have been cost of materials. Estate Agent said there were 2 other properties the same in the same road which were modern and were on the market for £50,000 more than what he valued ours for. We sold it for the asking price to the first buyers who were looking for somewhere they could make their own. We were looking at £2,000 for garage door, £15,000 for windows, £2,000 for front door and patio door, £5,000 bathroom, £4,500 for boiler, £4,000 for decorating, there’s no way we would have got our money’s worth back. So glad we sold it as it was.

All the properties in our area that are listed as MMOA end up being relisted with EA.

I sold a probate property in need of full renovation (barely livable condition, which sounds a lot like yours)

Went with a local estate agent. We put it on at 450k in Feb 2021. Took til April to get a buyer, which was a local property developer. Completed June, they paid 415k. I would say fully renovated it would be worth about 550k

They didn't get a survey, they were cash buyers. Which is what you want. I wouldn't bother with auction unless you are totally desperate to get shot of it.

The right buyer is out there - the mortgage landscape is horrific right now so you need a developer and that might take a bit of time.

It's mortgagable with a working kitchen/bathroom etc. On the plus side, it has UPVC windows and doors, a boiler from the mid 2010's and plenty of charm (e.g., original fireplaces). It has a really unconventional set of cellars, one of which could be converted into a large kitchen overlooking the garden.

The main issues are that most rooms haven't been updated since the 1970/80s, central heating is only installed in one of the cellars and first floor (not in 3 bedrooms/bathroom), rewiring is likely needed throughout and there is some water damage from a roof leak (which has been patched earlier in the year).

So not REALLY bad, but needs someone with skills, vision and experience to take on.

Maybe EA is the way to go, with the survey ready to present to buyers.

Estate agents always seem to say put it on the market as is and don’t bother doing any work - is this genuine or because they want to get the sale then and there.

It's a 3-bed house. I agree, £40/50k for full renovations feels like an underestimate.

Whilst I agree with this, getting ANYTHING done currently is extremely expensive and time consuming.

For a house that sounds like it needs pretty much a full reno, it's either all or nothing. I very much doubt the OP would make her money back and it would be a massive upheaval and lots of stress.

Now that I've read your other comments, I'm gonna say 80k.

Yes, buyers may still want to get their own survey done, but doing it yourself will speed up the process and lower the chances of gazundering, unless their own surveyor finds something major that yours does not.

I thin

Renting out a shit hole and refurbing it bit by bit around tenants? This is the arsehole option. Don't do this.

I am a conveyancer and my honest opinion would be to just sell it with the agent. A lot of people look for projects to put their own stamp on and if the house is in a good location and is a good size someone will certainly see the potential and fall in love with it! I would certainly only put it up for auction if you were desperate. I've seen cases of modern method of auction go on for far longer than the 56 days too ...

We had similar with my parents home and were advised to sell it through the usual route at a lower price and ‘as seen’. We could have tried to develop it ourselves but the profit margin would have been tiny and my sister and I lived miles away so didn’t fancy having to try and arrange trades. The house sold in a matter of days to a woman who bought it to be nearer her family and then did it up herself over time. A developer did put in a cheeky offer but we declined his kind offer.

I'd sell via an EA but be realistic about pricing and make sure EA makes clear at viewings that it's priced accordingly.

We've bought houses twice now in similar circs (from elderly widowers where house had plainly not been maintained for several decades). Lived very happily in the first for 15 years then a work relocation meant doing it again! It means you get a house you can make your own. For both we have rewired, put in new heating system (one boiler, one ASHP), done roof repairs, new bathroom, new kitchen. Most recent also new double glazing.

The first one the owner tried to haggle with us about price - he'd had it valued for probate at the height of the market when his wife had died. The market had then plummeted. It had been on the market 18 months and wasn't selling at a higher price!

Oh and we also viewed one that had been done up by a developer - you could see from pictures of previous sale how much they'd done. But it was to really individual taste and really not what we wanted - I wouldn't have paid a premium for a newly done up house that didn't fit our lifestyle.

Houses on the market via the MMOA around my way (South West) take forever to sell. Buying a house is difficult and expensive enough and all that new milarky and cost seems to put people off and it certainly does me.

My father's house was very much like the one you have for sale. After months of trying unsuccessfully to sell it via an estate agent we sold it at an old fashioned auction. Perhaps we could have got a little more money if we'd waited, but the auction method was quick and simple and cut the worry at a very stressful time.

I disagree. We are probably about to see tens of thousands of BTL LLs leave the market because they no longer have a profit margin, we will desperately need rentals.

If you gave me a choice of 900pm but understand and accept I will be doing it up over time over the 1600pm I currently pay with little market choice, I would gladly choose the 900pm, and even enjoy helping the LL improve it.

The key word is choice. There is already very little choice for tenants, even now, before things have reached the peak of awful.

i would view this as “ money I never had” and would flip it via the least stressful route. I definitely wouldn’t do a full scale refurb at the moment. It’s such a nightmare finding people to do it and prices are just crazy.

I bought a similar property a few years ago. It was via an estate agent but they did “ best offers by x date”. Was non binding but we were successful.