Property up & downsizing?
June 2, 2021
Moving to live together?
June 4, 2021
The buyer pulled out?
We can have it sorted. Deposit paid today to your bank account and the market value price agreed!
There two times when you are very excited - at the time of purchase and sale of the property. It is not nice. You were so excited to have your property sold and then at the late stage, the buyer pulled out...
Regardless of the reasons behind it, there is always the same question - what do we do with the existing property? Most people automatically wish to sell existing property not looking at the other options. And the only other option most people think of is just renting the property out. Renting is correctly not an option in most cases - risky, little and not guaranteed money, potential damage to the property, agency overcharging, maintenance to mention just a few. Rent to Buy seems like a great option for many. It is a combined sale with rent. Typically the buyer exchanges a contract today with deposit payment and rents the property for a few years before buying it for the higher price. We will explain the figures and advantages below. With down and upsizing each person needs to look in detail into their circumstances and financial aspects. From a financial point of view, you don’t need to sell the existing property to have enough deposit to buy another house. And lenders don’t have a problem with you having another property with the mortgage as well. Apart from losing the whole excitement of selling the property, you lose quite a lot more financially.
So let's see what you are paying for and how much it costs:
- Sale price. Ok, it is bad. Because your property is already on the market for several months and you have failed sale most people will either don't even look at your property or make lower offers. It is since buyers will assume that the previous buyer pulled out because of some serious reason. And it might be as trivial as not getting a mortgage because of personal circumstances and not the property-related issue, no one will accept it as an explanation. So realistically you are losing around 5% of the value of the property.
- You are still paying for your mortgage, utilities and council tax while it is empty and awaiting a sale. It might not be a lot in a month but because it is likely to be several months and the bill is already in thousands of £.
- Last but not least you are likely to occasionally check the property as the empty property is at times the target of criminals and because of lack of heating etc their condition gets worse. Let's say your time and petrol is likely to be in the hundreds as well. So, let's assume the £200k property you are losing is around £10000 in the sale price and £3-5k in other regular fees. Total £15000. It is a lot.
However, by selling the property you may ask yourself why do you have to sell the property now and more importantly do you need all money from the sale now? If you don't need a full amount today and there is no actual need to sell the property now there is an attractive option for you! Why don't you sell the property as a Rent to Buy? It simply works that the buyer pays a large deposit and signed a contract today with the actual completion taking place in a few years. And during that time the buyers pay you to rent as well. Let's assume your property is worth £200k and you have a £100k mortgage on it. You only need £50k and not £100k. You simply remortgage and/or collect a deposit from the buyer to get £50k. And the rest of the money will come to you in a few years.
Not only that you will hugely benefit from the following:
- You will not only get a full market value but slightly more. Realistically £205k. That's £15k more
- Buyer signs the contract and starts paying you to rent from day one and it doesn't take more than a few weeks to complete. You likely save at least a few months worth of monthly payments. Let's assume it is £2k
- You get monthly rent which is likely to give you a monthly surplus of around £200. That's £8k in 3 years.
- You don't even pay estate agent fees which is likely to be around £3k.
So in total, you save £28k! That is a huge difference for anyone.
The buyer pulled out?
We can have it sorted. Deposit paid today to your bank account and the market value price agreed!
There two times when you are very excited - at the time of purchase and sale of the property. It is not nice. You were so excited to have your property sold and then at the late stage, the buyer pulled out...
Regardless of the reasons behind it, there is always the same question - what do we do with the existing property? Most people automatically wish to sell existing property not looking at the other options. And the only other option most people think of is just renting the property out. Renting is correctly not an option in most cases - risky, little and not guaranteed money, potential damage to the property, agency overcharging, maintenance to mention just a few. Rent to Buy seems like a great option for many. It is a combined sale with rent. Typically the buyer exchanges a contract today with deposit payment and rents the property for a few years before buying it for the higher price. We will explain the figures and advantages below. With down and upsizing each person needs to look in detail into their circumstances and financial aspects. From a financial point of view, you don’t need to sell the existing property to have enough deposit to buy another house. And lenders don’t have a problem with you having another property with the mortgage as well. Apart from losing the whole excitement of selling the property, you lose quite a lot more financially.
So let's see what you are paying for and how much it costs:
- Sale price. Ok, it is bad. Because your property is already on the market for several months and you have failed sale most people will either don't even look at your property or make lower offers. It is since buyers will assume that the previous buyer pulled out because of some serious reason. And it might be as trivial as not getting a mortgage because of personal circumstances and not the property-related issue, no one will accept it as an explanation. So realistically you are losing around 5% of the value of the property.
- You are still paying for your mortgage, utilities and council tax while it is empty and awaiting a sale. It might not be a lot in a month but because it is likely to be several months and the bill is already in thousands of £.
- Last but not least you are likely to occasionally check the property as the empty property is at times the target of criminals and because of lack of heating etc their condition gets worse. Let's say your time and petrol is likely to be in the hundreds as well. So, let's assume the £200k property you are losing is around £10000 in the sale price and £3-5k in other regular fees. Total £15000. It is a lot.
However, by selling the property you may ask yourself why do you have to sell the property now and more importantly do you need all money from the sale now? If you don't need a full amount today and there is no actual need to sell the property now there is an attractive option for you! Why don't you sell the property as a Rent to Buy? It simply works that the buyer pays a large deposit and signed a contract today with the actual completion taking place in a few years. And during that time the buyers pay you to rent as well. Let's assume your property is worth £200k and you have a £100k mortgage on it. You only need £50k and not £100k. You simply remortgage and/or collect a deposit from the buyer to get £50k. And the rest of the money will come to you in a few years.
Not only that you will hugely benefit from the following:
- You will not only get a full market value but slightly more. Realistically £205k. That's £15k more
- Buyer signs the contract and starts paying you to rent from day one and it doesn't take more than a few weeks to complete. You likely save at least a few months worth of monthly payments. Let's assume it is £2k
- You get monthly rent which is likely to give you a monthly surplus of around £200. That's £8k in 3 years.
- You don't even pay estate agent fees which is likely to be around £3k.
So in total, you save £28k! That is a huge difference for anyone.
