To sell or not to sell?

by Readers Question

14:05 PM, 28th November 2013
About 7 years ago

To sell or not to sell?

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To sell or not to sell?

First of all thank you for all your suggestions and opinions. I have a property in negative equity, which I don’t live in, in a different area of country to where I am now located. I owe the mortgage lender £130,000 and I have it on sale now for £103,000. I have a buyer and I am now 5 months in to the process. However, I am considering withdrawing because it has taken this long to get to this point in sale ans we still have not exchanged contracts. This is mainly due to everyone assuming I have an abundance of time at my expense. I have been paying out about £700 a month in mortgage and council tax. To Sell or Not To Sell

The property itself is a 2 bed which lets at about £550 a month. It is near a good school, hospital, small shopping area, 15 minutes drive from a big ASDA. Decent local transport links as it is in the West Midlands. It is a nice area near a big park, 15 minutes drive to a motor way which you cannot see or hear from the property. It has private parking. The main issues is that there is probably an excess of similar properties in the area.

Running costs are £1,000 a year management fees, £150 a year ground rent, £650 a year consent to let fees as the mortgage lender does not do BTL mortgages and won’t cut me a special deal so far.

If I sell I probably stand to personally lose £20,000 to £30,000. If I keep it I’ll lose £3,000 a year, possibly more if maintenance is needed. I have lost about £5,000 (over 6 months) so far just in the process of this current sale as currently there are no tenants as the estate agents don’t sell with a tenant in-situ.

I know the markets will recover eventually….. well maybe.

The question is should I just get rid of it or keep it and hope for the best?

Thanks

Dan


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Mark Alexander

14:17 PM, 28th November 2013
About 7 years ago

Hi Dan

I need to start by making an assumption that you have the £30,000+ to fund the shortfall between the sale price and the mortgage redemption and cost of sale.

That being the case, personally I would hang onto it. I would put the £30k into a separate account to fund the losses which, based on your figures, should create a fund which will run out in circa 10 years.

Basically I would gamble that the property will increase by more than 30% in value before the funds run out.

None of us has a cristal ball but history does have a habit of repeating itself, albeit for different reasons. We are now 5 years into property stagnation and falling prices and many people think this will turn some time soon. Maybe it will be as a result of the Funding For Lending scheme, perhaps it will be due to the Help to Buy scheme or it may just be down to a release of pent up demand or something none of us have even considered.

Previous property booms have come off the back of the withdrawal of MIRAS, Right to Buy, the baby boom, electrification of train lines to improve commuting, availability of cheap and easy to obtain credit etc. etc. Who knows what will be the cause of the next boom? What we do know though is that demand continues to outstrip supply and that no government seems to have been able to address this issue over the last 50 years or seems to have any prospects of doing so over the next 50 years. It is that fundamental principle which makes the UK housing market so different to the most other places in the world.

I remember when there was a massive over-supply of property in Canary Wharf which depressed properties but as soon as the slack was taken up the values rocketed again.

There is no right or wrong answer to this question without the benefit of 10 years of hindsight but I hope the above will give you some insight into how how would look at this.

Good luck with whatever you decide to do, only time will tell whether you make the right decision.
.

Deepak Rajput

14:37 PM, 28th November 2013
About 7 years ago

Hi Dan,

Have you considered Rent To Buy (or in your case Rent To Sell)?

In essence you would give a Tenant Buyer an option to purchase the property at a pre-agreed price, usually a premium to the current market value, and within a pre-set time frame, say 3-5 years. In the interim they would pay you in excess of the market rent - this might entirely over your current mortgage payment?

Let me know if you'd like to discuss the matter further as I am an agent for a national company that provides such a solution.

Regards.

Deepak.

Jeremy Smith

14:41 PM, 28th November 2013
About 7 years ago

Hi Dan,
My only thought, so far, is to be able to reduce the fees by £650 by living in it yourself, but you say you are in a different part of the country, so relocation is probably something you don't want to do.
If you did, perhaps the property you live in could be sold, or let, instead, without the losses.

Julie Brant

14:48 PM, 28th November 2013
About 7 years ago

Hi Dan

I am a landlord. You say you owe 130,000 mortgage and you are selling at 103,000.

You are also running at a loss every year? Is this right??

Reason being you are paying out more a month on mortgage and other costs plus you pay a large amount a year in maintenance. Unless you can put your rent up??

I would ring my solicitor and find out why contracts have not exchanged? Keep on asking!

I would sell if the buyer will buy.

You could wait for the property to go up but that will take time. Can you afford to keep paying at a loss?

It is up to you but I would sell.

If you keep it you will keep paying out and in the end loose 20-30,000 anyway you have lost 5,000 already in 6 months is that right too?

Its awful and I feel for you!

Also if you carry on and if you have a interest mortgage the bank of England are saying the rate may go up.

Please let me know if you need anymore advice.

Julie

Jerry Jones

14:53 PM, 28th November 2013
About 7 years ago

How many receptions? Any scope for letting by the room as 2 or (if 2 receptions) 3 sharing?

Ian Ringrose

15:09 PM, 28th November 2013
About 7 years ago

The first ideal that hit me was “Rent to Buy” as it removes the maintenance costs and voids, talk to National Property Group to see what they say.

Peter Hindley

15:13 PM, 28th November 2013
About 7 years ago

Might be worth contacting Arsh Ellahi (just Google him) as he has a lot of LHA tenants in W Mids & goes in for rent maximisation strategies.

Simone Gilks (Mortgage Adviser)

15:21 PM, 28th November 2013
About 7 years ago

Afternoon,
Given that you need to subsidise this sale anyway, I can see little point in selling it other than an emotional one.

My thought would be to hold on to it for as long as possible, as Mark said put the funds into a slush fund and continue as you are until you seen an upturn in the market value.

With regards to renting it out, you can either rent it out as one unit or as letting rooms possibly (take advice on this)? Another consideration is to approach your local Housing Association; they should be crying out for good properties, near local amenities and the will pay good rents, on time!

The property market goes around and comes around; I have been in it since the 80's and seen some scary situations. So try and hold on for the ride, at this point you have no more to lose, instead of still paying out the money and having no asset at the end of it.

Hope it all works out for you

Simone Gilks

Mark Alexander

15:26 PM, 28th November 2013
About 7 years ago

Reply to the comment left by "Julie Brant" at "28/11/2013 - 14:48":

Hi Julie it's good that we have different opinions on stuff like this as it's adds balance to the debate. Welcome to Property118 🙂
.

Ian Ringrose

16:13 PM, 28th November 2013
About 7 years ago

Another factor, is the mortgage fixed rate, tracker, or “whatever the bank decides to charge”?

Interest rates will go up one day, personally I expect property prices to go up first, but what if interest rates are put up to control a overheating south each, while the Midlands is still not making any progress?

Also is the cash flow shortfall each month on a repayment mortgage or interest only?

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