Selling an HMO can be easy. That being said we have seen so many investors get it wrong. Having bought and sold over 100 HMOs across the UK we have put together this short guide on how best to Sell an HMO property.
Following these simple steps will give you the maximum chance of success at the maximum pric
1 – Consider the Pricing
Different types of HMO command different types of pricing.
- Smaller HMOs 3-6 Beds typically command residential pricing, location dependent
- Medium HMOs 6 – 9 Beds typically command income based valuations, location dependent.
- Large (9 beds +) can command income based valuations.
2 – Get the HMO Documents in order, early.
When buying an HMO, what gives potential buyers confidence to make an offer, is a full suite of documents relating to the HMO property, total clarity. In order to sell an HMO for maximum value get the following documents available and ready for potential buyers from the outset.
- HMO Floor Plan
- HMO Licence Certificate
- HMO Planning Documentation
- Building Regulation Certificate
- Fire Alarm Certificate
- Electrical Safety Certificate
- RICS Valuation (if available)
- High-Resolution Marketing Photos
- Rental Schedule
- Management Contract
In the cases when these documents suite is incomplete, or only show up during the legal conveyancing phase, typically more questions are raised, uncertainty occurs, and the chances of a successful transaction decrease.
Top Tip: In HMO property sales, maximum transparency leads to maximum price and maximum speed.
3 – Picking the Right HMO Agent.
Picking an agent who fully understands HMOs from start to finish is crucial in the HMO sale process.
HMO properties are complex in financing, regulation, planning, compliance and operations and so to be able to speak confidently to potential buyers about an HMO property any agent must fully understand the everything about HMOs.
Top tip: Pick an HMO specialist agent, or at very least qualify how much an agent understands HMOs. Local agents are great but have a significantly lower success rate when it comes to selling HMOs than specialist agents.
4 – Select the Right HMO Buyer.
When selecting a buyer for an HMO property, it is important to make sure they are fully qualified to purchase the property.
HMO property buyers that are prequalified with the correct HMO finance, who understand the intricacies of HMOs and can who actually transact, are the favoured option for maximising the chances of a sale transacting.
Questions to ask potential buyers:
- Do you own any HMOs currently?
- Do you self manage or use an agent?
- What HMO lender will you use to raise the mortgage?
These questions will help give an indication of how suitable and how prepared the potential buyer is to make the purchase.
Always check the buyer has adequate HMO financing, via cash or a specialist HMO Mortgage
Uneducated HMO property buyers will typically offer slightly more money to buy an HMO property, but have a 50% lower chance of actually transacting the property, so best to understand this early on.
Top tip: Always request to see proof of funds and decision in principle before accepting any offer.
5 – Set HMO Transaction Expectations
When properly prepared and managed, an HMO transaction should take no longer than 8 weeks, and could take as little as 4 weeks.
Once the best buyer has been selected, set the expectations of the transaction immediately, including terms of the sale, and the key time frames. If the buyer declines the expectations or terms, then a renegotiation maybe required or simply another buyer found.
Recommended time frames:
- Valuation Instruction Date – within 48 hours of sale being agreed, assuming a decision in principle already in place
- Property Valuation Date – within 14 days of valuation instruction. If they have chosen a lender that is slow or backed up, consider offering the property to another buyer.
- Solicitor Instruction Date – within 48 hours of sale being agreed. The
sellerssolicitor should send out a contract as soon as is practicable to avoid any delays. Some buyers solicitors won’t start work on the legal side of things until the valuation has come back, but to increase efficiency we recommend commencing the legal works without delay.
Top tip: Use a sales progression company. Normally they cost approximately £250 and only get paid if a property transacts. They maintain communication between all parties and normally speed up a sale by an average of 2 weeks, and increase the likelihood of a successful property transaction by approximately 50%.
6. Manage the Valuation.
Valuations are a common sticking point for many HMO sales so make the property and documentation is fully prepared in advance.
Have all documentation printed all and ready to be handed over. The valuer may not need all of it. Only give them what is asked for, no more.
Before the day
- Let the tenants know access to their accommodation will be required
- Make sure the property has had any essential maintenance.
- Instruct a pre valuation clean and clear program so the property is show in its best possible light.
On the day
- Arrive at the property early.
- Remind all tenants that access will be required.
- Clear away any remaining rubbish/clutter/bikes/washing up.
- Greet the valuer with a smile and relax.
- Maintain good communication until exchange/completion.
HMO property sales are more complex that normal residential sales, and so require more attention to get them completed and over the line.
Top Tip: From the valuation instruction to completion, great communication between all parties will ensure the maximum chances of a successful HMO property transaction.