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 wouldn't touch a house using the modern method.
I used to flip houses. As long as it's on at a realistic price for it's condition then you shouldn't have to renegotiate. And wouldn't go by estate agents estimates either. But anyone interested in that kind of property has an idea of what it will cost.

From this morning’s telegraph…..

I would agree with a PP that I don't think there are many developers about at the moment. There's a house near me up for sale. Could be a beautiful family home but is in need of full renovation. The EA has targeted it at developers, saying they can sell off most of the garden to build another house on. They've priced it to reflect this (price of family home + price for the land). It's been on the market for at least six months.

They really need to price it as a family home in need of renovation that just happens to have a larger garden. I think most families would prefer the space rather than selling it off and having another in their back garden, but the price is completely out of sync with everything else on the street.

I flip houses for a living. We bought a probate sale recently which went to best and finals, though it was priced sensibly to begin with.

We have a set of reliable trades and have been doing it long enough that we don't struggle to get them in when we need them.

In the right location and if priced right it will sell in the condition it's in. There still seem to be plenty buying, at least we're still competing when we buy.

I wouldn't touch modern method of auction, just feels wrong. If you want it gone quickly, put it in a traditional auction - you'll have to go to an auction house instead but results are still good.

To update on the thread, we went with an estate agent and agreed a sale over the summer.

All seemed to be going well until the buyer's mortgage valuation flagged structural issues. This resulted in an structural engineer's report and a quote of ~£10k for remedial works. We are/were unwilling to carry out the remedial works, which led to the buyer pulling out because they were unable to get a mortgage.

In essence, it's unlikely that another buyer will be able to get a mortgage on the property (same structural issues will be flagged). In the meantime, the market has slowed/fallen in the area. So we are left looking for a cash buyer in a falling market.

Any ideas on what to try next?

We are looking at a traditional auction or property buying company. The auction company has suggested setting the reserve price ~30% below the sale price we agreed, which feels like a big hit. The property buying company is offering similar, but there is a risk they will lower their offer once a survey has been completed...

Absolutely just market this with an estate agent. If it's mortgageable it will sell.

Sorry, should have read the thread right through!

30% below does seem like a big hit but if you don't sell, the alternative is £0 while the house sits there falling further into disrepair.

You could ask the agent to add "cash buyers only" to the listing but those are the same buyers who tend to be at auctions hoping for a bargain. At least with an auction it's binding.

What are the structural issues? Auction may well be the way to go.

Don't do MMA. They are a sucker trap for buyers who will just take their fees off what they are prepared to pay, and you will lose out.

Do traditional auction. But also be prepared to get the 30% lower than the auctioneer suggests starting at.

Homebuying companies will swindle you.

Have you tried advertising it again with 'cash buyers only' and dropping the price a fair bit? Seems less risky than any other method.

Long standing but potentially ongoing outward movement of the gable wall - the recommendation is gable wall, floor and roof strapping. The movement was also noted in a conveyance from the 1970s, so it's not new!

Vertical deflection of floor deck (joist deflection) - the recommendation is jacking up and strengthening of low-level deflecting floor joists with new joists.

The structural engineer quoted £1.5k for the dimensional survey and drawings to be done before any remedial work could be undertaken.

why don’t you want to do the work? If you can afford it (and perhaps you can’t), it would make more sense to do the £10k of work than take a hit of 30% on the price.

£40-50k for a full renovation anywhere is not going to happen. No point spending 10k on new doors etc when whole place needa plumbing/ electrics/ roof sorting etc. That is 100k plus easily and also at least a year of work away. I would sell as is

We don't live in the area to organise, and are keen to avoid the risk that these remedial works have knock-on effects for further work being needed.

Thanks - we've not yet tried putting back on the market at a reduced price, as trying to avoid weakening our position further down the line (e.g. if we knock £20k off now and don't find a buyer, the auctioneer could still recommend 30% below the newly reduced price...).

Experienced property renovators and builders probably wouldn't bother with a survey.

we put my grandfathers house to a traditional auction ( like under homes under the hammer) it was similar well built but nothing done to it since 1960's apart from central heating and boiler estimate was 120K houses in street generally sold for 170=180 as modern, someone offered 120 before auction but auctioneer advised lots of viewers and to hold tight, it fetched 150K a few years ago. developers will, be able to get renovations done for a lot less than people needing to get builders they can source kitchens and bathrooms at trade prices they have trades on hand and are used to coordinating them etc if it would cost you 80K a developer will get it done for 40-50K

at this point 4-5 months down the line I would be aiming for a auction in the New Year

Why not ask the auctioneer what they would do if you came back to them having cut by £20k and failed to sell again?

Honestly I would look at this very brutally. It is a pig of a market at the moment due to mortgage rates and inflation. Nobody is selling unless they have to and every sale is taking forever. You are stuck with an unmortgageable house, so only cash buyers, who are in clover at the moment and likely to beat you down further - as they should. All houses deteriorate further when empty.

Given all that, I would auction now. Maybe your loved one benefited financially from not spending big bucks on maintenance at the time? Anyway, the bill for all those delayed workshops come due now. Let professional auctioneers sell it and be done with it.

Workshops = works has

I wouldn’t put any weight whatsoever on what an EA says it would cost to renovate.

V hard for a novice to make money on a renovation in the current market. I’d sell to a developer pronto.

si it's worth about 190-200k now if OP renovates herself apart from all the trouble it is going to cost her 60-80K so total bills 250-280k then she might sell for 310 k so after costs she makes an extra 30-50K after months of trying to coordinate everyone check building regs etc from miles away
or she sells now 190k straight in the bank ( some auctioneers all costs are on buyer) or she might get 220-250 maybe next summer and if prices drop another 5-10% she might be no better off,
definitely traditional auction in New year with a couple of open viewings and take the money, ok a developer with experience will make more than 30-50K on it but OP can't do that as doesn't have the trade contacts for the labour or the fittings and if being hours away she has to appoint project manager that's the profit gone .... wwhoooosh

Property developer probably wouldn’t do a survey. I’d market via a traditional EA it at a value that will appeal to developers and get it sold as quickly as possible. If it doesn’t sell then I’d do a traditional auction.

Holding onto it for too long means you will be liable for gas, electric, water, council tax, empty property insurance, maintenance and need to keep checking up on the property.

Thanks - I've asked the auctioneer about the impact it would have if we came back in Jan/Feb after being unsuccessful on the market.

Agree that it's only going to deteriorate and we don't really want to be looking after it over winter, so auction looks the way to go!

I think you have to take the hit and auction it. The bare fact is that you inherited something which is not worth as much as you first thought it might be, because it's got structural problems - disappointing but you'll still end up with substantially more money in the bank than you started with.

If you don't sell it will only deteriorate further, and if you do the structural work yourself you might end up with the full market value but as you say, you're not willing to pay to take that risk. That's why the builder / developer pays less - he's willing to take a risk that you aren't.

I'd take it off the market until after Xmas now.

The market is tricky and not many people are looking for houses this time of year.