Assisted Sales can be a fantastic way that can help both yourself and the homeowner to make money with minimal outlay.
So, what exactly is an Assisted Sale?
Essentially, Assisted Sales is a technique where someone, usually an investor, ‘assists’ the homeowner to sell the property for more money than it’s currently worth.
They do this by adding value to the property using their own money to make the home more marketable and then it is sold on, which means the homeowner (and the buyer/investor) can receive the market value for the property.
Why would a homeowner go for an assisted sale?
There are many reasons a homeowner could go for an assisted sale, including selling faster, reclaiming stamp duty or inability to manage renovations themselves.
One of the biggest opportunities when completing an assisted sale is getting a higher price than they would if the renovation wasn’t completed. Buying without renovating almost always means selling the home way Below Market Value (BMV) and using this plan allows the homeowner to achieve a price that is more favourable.
There could also be a necessity to sell quickly because of cashflow, so it could result in a cash advance for the homeowner before works commence or maybe removing the cost of expenses such as utilities or mortgage payments. Sometimes, especially when the property is in probate for instance, these additional costs can be crippling to the homeowner.
So, what type of homeowner likes the idea of an Assisted Sale?
- A homeowner with mortgage arrears. This can be completed with the aid of the Mortgage Company to keep the home from being repossessed.
- Somewhere that is in very poor condition or has issues such as damp or other problems.
- Inheritance or Probate properties. They are usually empty and ideal for renovations, giving everyone involved the ability to renovate without paying out themselves.
- Someone looking to increase the value without spending money to refurbish.
- Someone looking for a cash advance (this is called an Assisted Sale with Cash Advance).
- It’s been on the market for ages and not selling.
There are lots of other reasons, but these are just a few to consider.
What the homeowner should be aware of
As a homeowner, you need to understand the legalities of this method of sale and your purchaser should also advise you. These will include, but are not limited to:
- Signing a contract that will detail everything that will happen to your property and what will be included in the price/costs.
- A charge being applied to the Land Registry Documents stating that you cannot sell the property without the permission of the buyer/investor. This is to protect their costs on renovating your home.
- All monies paid out by the buyer/investor, including cash advances and any ongoing costs, will be reclaimed at the point of sale before any profit split is made.
- A solicitor being assigned to read through the contract and complete the necessary legal work on your behalf.
There are many benefits and drawbacks of agreeing an Assisted Sale, here are some to consider.
Benefits:
- Potential higher profits from original BMV price.
- A speedier sale period.
- Having cash in advance if this method is adopted.
- Not having additional outgoings if these are covered by the buyer/investor.
- No management of issues in the property as these will be delt with by the buyer/investor.
- No Stamp Duty is due until the final sale is made once renovations are complete.
Drawbacks:
- Being aware that if you move into a new property before the final sale, it may result in additional Stamp Duty at the higher rate as a 2nd home owner.
- Making sure your solicitor has the knowledge to understand Assisted Sales to avoid delays.
- Making sure that if you have a mortgage, your current lender will consent to this type of contract or the Assisted Sale wouldn’t be able to progress due to 2nd charges on the property.
What the buyer/investor should be aware of
- You should have a detailed contract of what will be involved and what will be deducted from the final sale price – get this drawn up by a professional person who knows about these options and not just a standard off-the-peg contract, as this will not benefit you or the homeowner.
- There is no need to mortgage the property, but you must look at all exit strategies before jumping in.
- Make sure your figures work – offering the homeowner something that isn’t obtainable will mean that you are out of pocket as they will be receiving a guaranteed price.
- There are lower costs as you do not have to pay any stamp duty or other costs other than a solicitor fee and any payments to the homeowner, so this makes it a highly appealing option.
- The best type of Assisted Sale is an empty house, simply because of the upheaval of the renovations, especially if replacing a kitchen or bathroom. Make sure that if the homeowner is still living in the property that they are FULLY aware of this and have made preparations if their services are disrupted.
So, what’s the next step?
Homeowners should do their research (due-diligence) on anyone who approaches them for this method of sale.
Whilst we at Hummingbird Developers are upfront with everything and try to cover every scenario that may occur, making sure yourself that the company is trustworthy, has good reviews and are easy to deal with is something we highly recommend you do.
For the buyer/investor, they should make sure that the house is structurally sound by carrying out a full survey so they know what is required, that the homeowner has the legal right to sell the property and that everything is above board.
Summary
So to summarise, this option to sell or buy is not for the fainthearted. You should make sure you carry out your Due Diligence in the same way you would for any other high priced purchase.
- Know your market for buying and selling.
- If buying, know your homeowners needs as these are paramount.
- If selling, know your buyer/investor and don’t just trust what they say.
- Understand the legal requirements and have a good solicitor on hand to help you with this.
Speak to us about how we can help you
If you feel that selling your property via an Assisted Sale would work for you, Hummingbird Developers would love to assist, so why not contact us today to see how!
