Risks of selling to a tenant
While this type of transaction can be beneficial in
many ways, it can also be tricky.
For instance, you could be shutting the door on a
Sure, you’ll save on advertising and real estate
commissioners. But you’re losing out on any competition from other interested
buyers, which could be worth a whole lot more to you
Currently, with fewer investors in the market to
buy properties and the fact that owner-occupiers buy properties with their
hearts rather than their calculators, this usually means you’ll get a higher
price selling your property vacant on the open market with the maximum number
of potential buyers looking at your property – both buyers and investors.
If your property is located in a hotspot or a tight
market, you definitely want to consider listing it on the market for public
sale instead, so you have a chance to get the best offers.
Keep in mind that it’s likely your tenant will try
to negotiate with you on the basis of your existing relationship, and their
knowledge of the property’s ins and outs.
If they have lived in the property for many years and made personal changes, they start to think that you should reduce your
price for what they have done to the property,
Some of these ‘improvements’ may have actually
devalued your property, but they will still expect a discount.
In cases where the condition of the property could
end up being a sticking point for you, it could be wiser to assess the
situation and spend the money on sprucing things up.
As a result, you may even add greater value to your
property for outside buyers.
Paying Commission When Selling to a Tenant
If your property manager just gives you the tenant's
contact details, then there should be no commission payable. Remember you
already have a contractual arrangement with the tenant, A lease, so you may
have their details.
When you engage an estate agent to sell your
property, you will sign an authority that specifies the commission payable. It
doesn’t matter where the purchaser comes from, whether they are your tenant or
the agent’s database or a marketing campaign produces a buyer. The same
commission is payable. The agent should earn their commission by negotiating a
better price for you.
The decision on whether to sell a property to a
tenant ultimately depends on your priorities and circumstances.
The important thing is to keep the true value of
your property in mind.
You may avoid some of the stress and time invested
in a sales campaign by taking this shortcut, but at what financial cost?
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Thursday, 4 March 2021