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  • Buy-to-Let

    8 costs associated with selling a BTL property ...

    Following on from my post "13 costs associated with buying a BTL property", I am now doing a post with costs for selling a BTL property:

    1. Estate agent fees

    Standard estate agent commission is around 2-3% of the sale price, although you may be able to get around 1.5% if you opt for a "sole agency" option.

    Some agents also offer a flat fee. You can pay more for premium listings on the property portals etc.

    2. Legal fees

    Conveyancing costs can range from around £600-1,500 plus VAT, depending on a number of factors (e.g., the cost of the property, complexity of the transaction, etc).

    3. Early repayment charge

    Usually fixed and discounted variable rate mortgage lenders impose a charge if you repay the loan early. The charge can be as high as 1-4% of the outstanding loan. This can have a huge impact on the sale of your property, so check with you lender and request a loan redemption statement so that you are sure.

    4. Exit fee

    Another charge levied by mortgage lenders, this time when you finish paying off your mortgage or switch your mortgage to another lender. The fee may be as high as £300 in some cases.

    5. Indemnity insurance

    An indemnity policy is a type of insurance taken out to deal with a defect in the title of the property being sold (e.g., a restrictive covenant or a missing document of title). As a way to complete the transaction, but also satisfy the buyer, your solicitor may suggest you take out an indemnity policy, which will pay the buyer if the defect becomes a problem. All such policies require that their existence not be disclosed to third parties.

    6. Capital gains tax

    Any capital gain made from an investment property is subject to Capital Gains Tax. This will be calculated on what you paid for the property compared to what you sold it for. It is wise to seek specialist advice from an accountant to ensure you minimise your capital gains liability through the sale of a investment property.

    7. Arrears/2nd charges

    If there are any arrears on your mortgage, or any arrears on your services charges, or any other charges on your property's title, these will be paid off from the proceeds of the sale.

    8. Clean and clear

    The property should be cleared of all your belongings (unless "Sold as seen") and also cleaned to present it in a good state to the new owners.

    Please add any other costs that I have missed ...

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    I was reminded on twitter that I had forgotten:

    9. VAT

    VAT on estate agent fees & other professional fees.
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    Just realised I missed an important one off!

    10. EPC

    Energy Performance Certificates

    When marketing a property you will need an Energy Performance Certificate (EPC). You must have commissioned the EPC before placing your property for sale on the market, but you can start marketing your home before the EPC is received. EPCs provide 'A to G' ratings for the home's energy efficiency and carbon emissions, as per EU regulations. EPCs tell buyers the current average costs for heating, hot water and lighting for the property as well as how to cut costs with energy-efficiency measures.
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    hi Vanessa, to our cost as the sale fell through, there is also council tax on an empty property to be paid every month and standing charges for water, electric and gas. There is also the worry of the property being empty, luckily ours was in a secure block of flats. I really wish there was a web site where you could sell BTL properties with tenants in situ, I'd definitely us it.
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    (30-10-2013 02:57 PM)elaine48 Wrote:  I really wish there was a web site where you could sell BTL properties with tenants in situ, I'd definitely us it.

    Would you? Now there's food for thought!!
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    11) Void costs

    If you sell with vacant possession, the only way to guarantee this is to market it once the tenants have left - this will create a rental void plus utility costs.

    or....

    12) Devaluation due to tenants

    You can sell it tenanted and you'll probably sell it for less than it's vacant possession value to an owner occupier as you've restricted yourself to investors, who will apply a risk discount due to the "unknowns" associated with the in situ tenants.
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    This is a good list of costs associated with selling a BTL property through an estate agent.

    But selling a property to a cash buyer can reduce the associated costs more than you might imagine.

    I recently wrote a blog comparing the costs of selling through an estate agent vs. selling to a cash buyer.

    I pay cash for properties with tenants in situ, including sitting tenants.

    There are no estate agents fees, no legal fees (because I pay the seller's fees), no voids, etc.

    I typically pay 85% cash of market value for a property and can complete in any time frame to suit.

    I even purchase entire portfolios!

    If any PT'ers have any leads or any properties that they would like me to make a cash offer on, then just email me info (at) dreamhousebuyer.co.uk.

    I pay £500.00 commission for any leads that result in a purchase.

    There are many circumstances where selling to a cash buyer makes a lot of sense, so I look forward to hearing from anyone who thinks this might be a suitable solution for them.

    Richard Hill.
    Founder, DreamHouseBuyer.co.uk
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    Richard Hill
    Founder, DreamHouseBuyer.co.uk
    Investing in property since 1962
    Follow me on twitter @dreamhousebuyer