Selling a Buy to Let Property
If you have decided to sell your buy-to-let property, you need to ensure that you follow the appropriate procedures. There are various reasons why you may be looking to sell your buy-to-let such as the recent tax changes for investors. You may want to reduce your investment property portfolio or are wanting to take advantage of increasing house prices.
Your buy-to-let is considered a commercial property as it is a source of income and is not your main residence. Therefore, if you have decided to sell your buy-to-let property, you need to make sure that you are as prepared as possible.
In this guide, we’ll take you through everything you need to know about selling buy-to-let properties.
Getting a Valuation
The first step in the selling process is getting an accurate valuation. You can do your own research such as checking sold prices via property portals such as Rightmove or Zoopla.
Here are some valuation routes you can take:
Valuation Report
You can hire a RICS-regulated surveyor to carry out a valuation survey. This is a basic level inspection where the surveyor will consider the property’s location and condition. It is not a mandatory part of selling buy-to-let properties, but it can give an accurate indication of the property’s estimated value.
Valuation reports cost around £320 on average.
Read more about How to Find a Surveyor
Estate Agent Valuation
Estate agents can also provide a valuation for your property. When it comes to choosing an estate agent, opt for one who is experienced in selling buy-to-let properties in the same area.
The estate agent will review the interior and exterior to get an estimated value of the home. They will also consider the local market and demand for the type of property.
Estate agents offer this service for free. However, this does not hold the same clout as a RICS valuation.
Auction Appraisal
For those looking to sell their property at auction, your chosen auction house will send an approved auction valuer. They will visit the property as part of the appraisal and advise you on a reserve price based on their findings.
Buy-to-let properties are popular at auction among landlords looking to invest in a rental property. This can be with or without tenants. You may not get the full market value at auction, but you are more likely to receive a cash offer which is highly convenient.
Most auction houses offer free appraisals for those looking to sell with them. However, if you want a valuation with no plan to sell, this will likely incur a cost.
You will need to hire an Auction Conveyancing Solicitor if you choose to sell your property at auction.
Should you sell your buy-to-let as tenanted or vacant?
Before you put your property on the market, you need to decide whether you want to sell your buy-to-let property tenanted or vacant. You can discuss this with your tenants as they may wish to purchase the property themselves.
If your tenants can’t or don’t want to purchase the property, you will then need to decide whether to sell the home tenanted or vacant.
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Selling a Property With Tenants
Selling a property with tenants is also known as selling with a ‘tenant in situ’. This must clearly be stated when putting your property on the market.
The main advantage of selling a property with tenants is that it provides the new landlord with guaranteed rental income. This means that they are already providing value to the landlord’s property portfolio.
There is also an advantage of not losing money in the time that it takes to sell the property. If you wish to vacate the property before selling, you will not receive rent for however long it takes to sell.
Selling with tenants in situ can be a complicated process. This is because the market is limited to landlords and the prospective buyer will want to examine the terms of the existing tenancy. In some cases, they may want to carry out their own referencing on the sitting tenants and provide updated contracts.
The Tenancy Agreement
When it comes to the logistics of selling a property with tenants in situ, there are a few factors to consider. The tenancy contract will usually contain a clause to specify that if the landlord intends to sell, the tenants must allow viewings. Ensure you give appropriate notice for each house viewing - typically 24 to 48 hours.
It is likely that the seller must arrange for the transfer of the protected tenancy deposits to the new landlord.
Selling a Property Without Tenants
Selling your property without tenants means that your target market is not just limited to landlords. A vacant property can open it up to other potential buyers, for example, those looking to live in the home full-time.
If you wish to sell the property without tenants, it is important to tell your tenants at the earliest possible convenience. This gives them the opportunity to find alternative housing if they are not interested in buying the property themselves.
The laws regarding notices differ between England, Scotland, and Wales. They are as follows:
England
In England, landlords must provide at least 2 months’ notice for tenants who have lived in the property for a minimum of 6 months, according to the Government website. This applies to those on a periodic tenancy (known as a ‘rolling contract) as well as fixed-term tenancies. If you are on a fixed-term tenancy, the landlord must ensure that the eviction date is on or after the term has ended.
For those who have been asked to leave during their fixed term, the landlord must provide evidence of one of the following:
- The tenants are behind in rent payments (known as rent arrears)
- The property has been used for illegal purposes such as selling drugs
- The property has been excessively damaged
Scotland
In Scotland, all tenants are entitled to at least 28 days’ notice, according to the Scottish Government website. The minimum notice is allocated for those who have lived in the property for less than 6 months or those who have breached their contract.
For those who have lived in the property for more than 6 months and have not breached their contract, landlords must give a minimum of 84 days’ notice.
Read our Guide to Selling a House in Scotland
Wales
In Wales, the law surrounding private tenants was changed in 2022 to offer them more security, according to the Welsh Government website. Landlords must provide at least 6 months’ notice for those who have lived in the property for a minimum of 6 months. This notice is referred to as a No Fault Notice.
No Fault Notices can only be issued after at least 6 months have passed.
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Conveyancing Fees
The average conveyancing fees when selling a buy-to-let property are £1,270 for freehold and £1,420. Selling fees tend to be less than buying. This is because potential buyers will have to pay conveyancing disbursements and costs such as Stamp Duty Land Tax.
However, bear in mind that in difficult cases, there may be extra costs involved when selling.
Use our Conveyancing Fees Calculator to receive a cost estimate.
Capital Gains Tax
If your property has increased in value by more than the allocated allowance, you will be subject to Capital Gains Tax payments. Capital Gains Tax (CGT) is a tax on any profit made when selling your property if it has increased in value. It is only the “gain” that is taxed, not the overall amount the property is sold for.
There is a tax-free allowance of£12,300 a year but the tax will need to be paid on any amount beyond this. CGT payments are determined by tax brackets. This could be 18% for basic-rate taxpayers or 28% for higher-rate taxpayers.
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What Are the Mortgage Implications?
If you have a mortgage on the property, you may be subject to penalties if you sell before the end of the fixed term on your mortgage. Buy-to-let mortgage interest rates tend to be higher compared to regular mortgages. Therefore, the exit fees can be costly, especially if you are ending the contract well before it expires.
Your lender will consider what type of mortgage product you have. If you are on a fixed-rate mortgage, you will likely have a higher repayment charge if you are ending the agreement before the contract expires. It’s always best to contact your mortgage lender to discuss any penalty fees before proceeding.
If you are selling to buy another property, it may be possible to “port” your mortgage. Porting a mortgage essentially means taking your existing mortgage with you to the next property. Your lender will be able to advise you on the best option for you.
The exact implications you will face are dependent on the terms and conditions of your existing mortgage agreement.
Read more about The Different Types of Mortgages
Finding a Conveyancer
At Compare My Move, we can connect you with up to 6 licensed conveyancers who can help you with the sale of your buy-to-let home. You’ll be able to compare conveyancing quotes and save money on your fees.
