The property sales market in Aberdeen, once again, has slowed down. Many house sellers see the option of letting the property whilst they are selling it an option. The view of house sellers (now accidental landlords) is that they would get some income and stop paying council tax and utilities whilst waiting for their property to be sold.
We strongly advise against that strategy. Yes, we are a letting agency, and we are telling potential customers not to come to us on these basis. Why?
In principle properties in Aberdeen will be let faster than they will be sold. Currently the average time to let a property in Aberdeen is 50 days (Citylets Q3 2020 Report), whilst the average time to sell a property is 409 days (Home.co.uk). With that in mind, sellers assume that letting a property within a couple of months (which would bring some income) combined with selling the property in 14 months will bring the best of both worlds. Unfortunately that is not the case.
The reality is that those figures are ‘average’, and the average property is either in the letting market or the sales market only. Only a handful number of properties are in both the sales and letting market simultaneously. And this is where the problem lays:
A property in the lettings market that is also on the sales market will attract a much lower number of enquiries. Potential tenants will see a property that is in the letting and sales market simultaneously, as a property where they will be lawfully evicted within 12 weeks. This period has been increased to 6 months thanks to the new COVID-19 legislation, but sooner or later it will go back to 12 weeks. No tenants, with so many properties to choose from, will apply for a property under these conditions unless:
- They push the rent massively down to a point that it may not be worth it for the landlord to let the property in the first place
- They have an intention to leave the property within 3 to 6 months, which again will jeopardise the landlord’s position
Now, let’s assume that the seller (and now accidental landlord) accepts to rent the property with one or both of the conditions and risks above. Logic tells that an scenario as the one above is less likely than a normal let, thus one can expect a let in these circumstances will take much longer, if possible at all.
But let’s assume that it’s the seller and landlord’s lucky day and a tenancy is secured. That is just the beginning of the problem.
From that point onwards, the seller/landlord will want to continue with the efforts to sell the property. But now there is a tenant occupying the property. If at this point the property is seen by any potential buyer, it won’t be empty or pristine as a show house. It will be reasonably cluttered with the tenant belongings, and the landlord will have no control of how the property is presented. Furthermore, any viewing will have to be organised around the tenant’s requirements and with at least 24 hours written notice. Logic tells that in these circumstances the time to sell the property will increase and the achieved price will be lower than if the property was empty, cleaned, and available 24/7 for viewings.
To make matters worse, whilst the current COVID-19 emergency legislation remains in place, is a sale is secured the seller/landlord will have to wait 6 months to complete the transaction and the First-tier Tribunal (the tribunal in charge of issuing eviction notices in Scotland) will have the discretion to accept or reject the eviction request under Ground 1 (Landlord is selling the property). In normal circumstances (i.e. non-COVID-19 world) the Ground 1 request triggers a mandatory scenario (i.e. the First-tier Tribunal must accept the request if all legal proceedings have been completed correctly), but in the COVID-19 world all grounds for eviction are applied at the discretion of the First-tier Tribunal.
The answer? Decide whether you want to sell our let for the next two years, stick to that decision and market your property only for sale or to let.
- Selling in an average time of 409 days whilst accepting an offer of 10% below the valuation price (which is what is typically happening at the end of those 400+ day) may not be an option. If that is the case either reduce the selling price further to secure a ‘below average’ time sale.
- If massively reducing the sales price is not an option, then abandon the idea of selling for a couple of years and then move to the ‘letting’ market only.
- A third option could be to leave both properties on the letting and sales market, but give legal assurance to the tenant-to-be that Ground 1 (Landlord intends to sell the property) won’t apply for the duration of the tenancy, or for the first X number of years of the tenancy. But again, adding layers of complexity in the decision making of a tenant in a market with so many choices may jeopardise securing a tenancy.
Overall we strongly recommend to market properties on the letting or sales market only. Go narrow and deep in your marketing strategy, rather than wide and shallow, and you will achieve the best possible result.
One last thought. We’ve heard the comment ‘the potential tenant won’t know that the property is also on the sales market’. That is wrong it many aspects. A professional and ethical letting agent will always let the tenant know any situation that may adversely or favourably affect their tenancy. Some agents may argue that any landlord can start proceedings to move a tenant out of the property because the property is going to be sold. But starting a property in the knowledge that the property is on the sales market is a completely different proposal than starting a tenancy when the landlord has no intention of selling the property at present. Yes, the situation can always change, but the probabilities of the tenant being evicted by the landlord because the property is being sold in the second case are extremely low. We at Martin & Co will always let a potential tenant know if a property is also on the sales market at the onset of the application process.