Important Steps in the Property Selling Process Explained
Once you’ve decided to sell your house and have made any necessary improvements, it’s time to put it on the market. You will need to think about the best time to put it on, bearing in mind the state of the property market and the time of year.
The next decision you need to make is whether you will market your house yourself, or sell through an agent. Whichever route you go, make sure you are aware of the issues involved in the legal contracts that selling entails, and if you sell through an agent, choose carefully.
If you’re selling a house that is a second home or a rental property, you will probably have to pay Capital Gains Tax on the profit you have made, so you will need to take that into account in any estimation of selling costs.
Do remember that when selling a house there are certain things that you must disclose by law. You must disclose any history of flooding, and any problems that aren’t apparent, such as a long-running dispute with a neighbour.
If you’ve made any changes without obtaining planning permission, you must also inform a potential buyer, although a survey would bring to light any illegal alterations.
The Property Market
The property market in the UK has been booming over the last few years, with 33% of houses selling within three weeks, and 60% in less than ten weeks.
However, the market began to slow down in 2004, and by the end of the year, the number of unsold properties was the highest it has been for four years.
Before putting your house up for sale, you should investigate the state of the property market, as it isn’t advisable to sell during a property slump unless you have to. It may be more prudent to let your home long-term and wait until the market has recovered.
If you’re moving abroad for a few years, it’s better to maintain a foot on the property ladder, and let your home rather than sell it.
The number of other houses for sale might also affect the market in your area – too many ‘for sale’ boards in the street may ring alarm bells with prospective buyers.
Spring is usually the best time to sell (between March and May), and autumn can also be good. Having said that, a really good property can be sold anytime, although it may take a bit longer in mid-winter.
Plan well in advance and contact estate agents around three months before you want to put your house on the market, as they will need to measure rooms, take photographs, design brochures, and advertising – this will always take longer than you think.
Valuing Your Property
The best way of ensuring a sale is to ask a realistic price – a property doesn’t have a fixed market value and is worth exactly what a buyer is willing to pay for it.
However, don’t undervalue your home. If house prices are rising and property is in demand, you should test the market first before accepting an offer.
If you have an unusual property that’s in high demand, such as an exceptional period property or a converted mill or barn, it may pay off for you to invite sealed bids or to sell it at auction.
If your house is fairly standard for the area, find out its market value by comparing the prices of other similar homes on the market or those which have recently been sold.
If your house is fairly standard for the area, find out its market value by comparing the prices of other similar homes on the market or those which have recently been sold.
Most agents will provide a free valuation in the hope that you will sell your house through them. This may lead them to inflate the price to encourage you and get your business, however, after locking you into a sole agency contract they may then suggest you lower the price after a few weeks.
Valuations by different agents may vary by as much as 10 or 20%, and so you should try to obtain at least three valuations and pitch the asking price around the middle range rather than at the highest one.
You should be prepared to drop the price slightly (5-10%). You should also think about setting it just above or below a Stamp Duty Land Tax threshold, if applicable.
If you’re in no hurry to sell, you could price it at the highest valuation and lower it later if you get little or no interest.
You may want to think about including some furnishings and appliances in the sale – you could add an appropriate amount to the price to cover the value of any extras you include, or alternatively you could use them as an inducement to prospective buyers.
There are many things that will instantly add value to your property when comparing the market price to similar sized houses in your area:
- extensions, such as a conservatory or loft conversion
- upgraded bathrooms
- additional bathrooms (especially en-suites)
- central heating
- upgraded kitchens
- extended kitchens
- landscaped gardens
- a garage (or addition of a double garage)
Alternatively, obtaining planning permission to carry out some of the above works can also increase value considerably.
For example, planning permission for an extension can add up to 15% to your property’s value.
This means that by spending approximately £2,000 on architect’s drawings could give you an additional £25,000 on the sale of your house.
The Home Information Pack
The government has introduced a new law designed to speed up the home buying process to approximately six weeks, with the hopes of reducing gazumping.
The vendor will be required to produce a ‘home information pack’ (also known as a ‘sellers’ pack’) before putting a property on the market. However, this law is not due to come into effect until 2007.
The pack will be assembled by the estate agent on behalf of the vendor at the cost of between £400 and £800, depending on a property’s size, location, and history.
It will contain:
- Ownership details and title deeds
- Details of any guarantees and warranties in force
- Details of any relevant planning or listed building regulations
- Results of local council and utility searches
- A survey or home condition report including an energy efficiency assessment
- Terms of sale
Packs for leasehold properties will also contain:
- Details of the lease
- Service charges
- A building insurance policy
- Any regulations made by the landlord
Fears have been raised that buyers and lenders may not fully trust a survey commissioned by the vendor, which means that they would still want to carry out their own survey.
Additionally, surveyors are currently only responsible to the person who commissions a survey, and under this system, the buyer would have no redress if a major fault was discovered, which could lead to costly legal disputes.
Choosing an Estate Agency
Most property sales are conducted through an agent, whom the seller pays to represent them in the selling transaction. Ideally, you should ask three agents to value your property and recommend the selling price.
Personal recommendations are a good place to start, especially from someone who is sold property similar to yours – perhaps a former neighbour.
- Look at the sort of details your chosen agents produce for properties like yours.
- Ask each agency what they see as your home’s main selling point, and get detailed information on how they plan to advertise it. How often will it appear in the local paper? Do they have a web site or do they supply details to a composite web sites such as https://www.zoopla.co.uk
- Look for an agency that demonstrates a good knowledge of the area and shows a genuine interest in handling your sale.
- Choose someone you get on with. A good relationship with the agent is important and will make it easier to sort out any problems that may arise.
- Consider using a smaller agency – they may depend more on your sale and make more effort than a large agency, which may have so many properties that they can’t give yours their full attention.
- Remember that fees are negotiable and you should always try to arrange a lower fee, particularly when selling a desirable property.
Look at the charges carefully – most agents charge a percentage of the final sale price, which means you only pay if and when the property is sold.
But some may offer a lower percentage and charge fees for advertising, putting up the sale board, and arranging viewings, all of which you may be liable to pay for immediately.
Check the small print and asked what happens if you sell to a neighbour, friend, or colleague – some agencies claim ‘ sole selling rights’ (not the same thing as ‘ sole agency’ rights), which means you have to pay their fee even if you are not selling the property without their help.
This may even apply for a set time of your contract with the agent has expired.
Don’t automatically opt for the agency quoting the highest sale price – they may just be desperate to your business.
A difference of 5% is acceptable, is the estimates are adrift by more than this, asked the ageing quoting the highest rated to justify the figure with actual examples of recent sales of similar property in the area.
Example costs of Selling a Home in England and Wales
Types of Selling Agreements
Before an agent can offer your property for sale, they must have a signed authorization from you.
There are the following kinds of agreement:
1. Sole Agency Agreement
This is the cheapest option – you agree to let just one agent tried to sell your property for a set number of weeks. Some agents will try to get you to sign a contract for three to six months, but try to avoid this as you may very well want to change agents if they turn out to be hopeless. Some agents may offer cash incentives to obtain the ‘sole agency’ rights to sell a property. The fee for the sole agency is usually 2 to 2.5%. Take into consideration that VAT at 17.5% is always added to bills, for all agreements.
An estate agent may well agree to a shorter sole agency time than their terms and conditions state. Try to get this amended when you sign up, rather than challenge it later if they haven’t found a buyer.
2. Sole Selling Rights
Avoid this agreement if at all possible, as it means that you must pay the agency a fee even if you sell your home to a friend or relative. Normally you should only pay an agent a fee if the buyer was introduced by them.
3. Multiple Agency
You instruct as many agents as you like and the one who sells your property receives the commission. The theory is that more agencies will give you a wider audience, which may mean you receive a better price, and so can afford to pay a higher commission. However, marketing material is often inferior to other options, and so you may need to pay for extra marketing.
If you start with a sole agency agreement and the agent doesn’t manage to sell your property within the agreed sole agency time, you can try multiple agencies as the next step.
Multiple agencies may be worth considering from the start, however, if you want to sell very quickly, or if your property falls between two areas of potential buyers (whether districts of the city or nearby towns) and your first choice of agency doesn’t have a branch in both areas. The fee for multiple agencies is usually 2.5 to 3%.
4. Joint Sole Agency
With this type of agreement you sign up with two agents only, both of whom agree to the arrangement and decide between them how they will split the commission. However, this agreement is pretty rare, and a waste of time, as a multiple agency listing would offer a better service. The fee for the joint sole agency is usually between 2.25 and 2.75%.
5. Flat Fee
Some agencies charge a flat fee to sell a home, although this is non-refundable if they fail to sell it. Make sure that you know exactly what they will do for their money before paying anything.
Selling Property Without an Agent
Selling your property privately, without involving an estate agent, may entail more work on your behalf, and you might find it hard to reach as many prospective buyers as an estate agent would.
On the other hand, if you’re successful, you’ll save the commission you would have to pay an estate agent.
If you have already signed with an estate agent, however, don’t agree on a private sale unless you’re certain that you aren’t breaching your terms of your contract, or you could still be charged a fee (see our article on Types of Selling Agreements).
- Find out how much estate agents are asking for similar properties in your area.
- Pay for an independent valuation from a surveyor.Decide the asking price.
- Draw up a short description of the property, using the conventional abbreviations used in the local property paper. Ask a friend to check it, in case you’ve forgotten anything.
Advertising Your Home Locally
- Pay for a small ad in the local paper, giving a telephone number but not your address.
- Drop details into local letterboxes. It’s cheeky, but people do it – your home may be just what someone locally is looking for, whether it has a special feature, bigger garden, or is simply larger or smaller than their own.
- Ask to display an advertisement on staff noticeboards in large offices, universities, or hospitals.
Advertising Further Afield
Sign up with a company on the Internet. One way Internet companies can afford to advertise your home without charging you or the eventual buyer is by passing your details to other companies who are interested in people who are moving and might want their products/services.
You aren’t committed to buying any of these. Read the small print carefully.
Set up your own website dedicated to selling the property. This may be worth doing if the value or location of your property makes it of special interest. Don’t give the exact address, and emphasize if it’s in a tourist area or employment hotspots, especially if employees come to the area from a long-distance or from abroad.
If you’re in a popular area but don’t want to go on the Web, an advertisement in a national Sunday newspaper or magazine may produce a buyer.
Showing People Round
Create a demand. Estate agents often arrange the several potential buyers to view and more or less the same time, to make the property that popular.
Hold an ‘open house’ viewing on a single afternoon, so that prospective buyers find the place buzzing and realize they need to make a good offer quickly.
Always have another person with you when you show round potential buyers.
Making a Sale
Ask for all offers to be put in writing to your solicitor or conveyancer, even if you’re being offered the asking price.
This gives you time to consider the implications of the offer, for instance, does the prospective buyer have funds already available?
Insist that any subsequent negotiations on price or contents are done via your legal representative.
Selling By Auction
Properties are usually sold by auction to obtain the highest market price, and it is a good method if it would be otherwise difficult to put a value on a property, for example, if the property is unusual, as the market finds the best price.
Selling by auction can be a swift process so you should ideally have made arrangements for new accommodation and storage for furniture if necessary.
A date for completion is set before the auction; usually, 20 working days (4 weeks) after, and this information is included in the selling guide.
The aim of the auction is obviously to exceed the asking price but if you do not reach the reserve price you can still sell privately to an interested party, possibly immediately after the auction.
The Cost of Selling by Auction
Auctioneers fees are approximately the same as those charged by estate agents (about 1-3 %), but you will also need to pay the preparation costs. These are the charges made by the auctioneer to prepare a brochure and for any advertising.
You will also need to arrange for a solicitor to carry out the legal work for you.
You should remember that you will have to pay auction costs even if the property does not sell.
If the auction is successful, the auctioneer will sign the contract on your behalf and receives the 10% deposit. The remaining balance is usually required within 20 working days, and this will be specified in the contract drawn up beforehand.
Accepting an Offer
Work out what you need to make on your sale, so that you know whether an offer is worth accepting. This will depend partly on your circumstances: if you are buying another property, you probably have a specific figure in mind you need to reach to make your new purchase, allowing for your legal costs of the sale and purchase.
If you’re downshifting to a smaller home or less expensive area or moving into the rented property, you may be able to be more flexible about what price you accept.
- If the property market in your area is strong, it might be worth making it clear that you won’t negotiate: state on the property details that you won’t drop the asking price even if a survey reveals minor defects.
- Don’t stick to an unrealistically high figure for the sake of it, however – it will probably take longer to find a buyer, and you may have to drop the price if the buyer’s survey and valuation suggest that you’re asking too much.
- Don’t jump at the highest offer without thinking it through – more money doesn’t necessarily mean a more committed buyer. Opt for a buyer that wants your home and has the resources to pay for it.
Questions for the Agent
If you use an estate agent they will advise whether or not to accept an offer, but you should specifically ask whether your potential buyer:
Needs to sell a property before they can buy. The more links there are in the chain, the more delays there are likely to be before completion.
Has finance arranged? A genuine buyer will be able to produce proof that the lender has provisionally offered them a mortgage. If they claim to have a large proportion purchase price available as cash, ask your agent to check out the details.
Buyers are desperate to have their offer accepted sometimes promised more than they can deliver.
Capital Gains Tax
Capital Gains Tax (CGT) is payable whenever you sell or dispose of (lease, exchange or give away) property in the UK other than your principal home.
However, if a property was acquired before 31st March 1982, no capital gains tax is usually payable.
When you sell a second home acquired after 31st March 1982 and make a gain that’s above your annual CGT allowance you’re liable for CGT. This is payable at your highest rate of income tax (between 10% and 40%), although you can deduct expenses incurred during the purchase and sale (including legal fees and mortgage arrangement costs), plus the cost of improvements and maintenance during the period of ownership.
If you’re married, you can share ownership with your spouse and you both qualify for the annual CGT allowance. If you pay tax at the higher rate and your spouse is a basic rate taxpayer, it would make sense for them to own the property.
If you have two or more homes in the UK, living part of the year in one and part in another, you can nominate which property is your principal residence for CGT purposes, but you must live in it some of the time.
It’s best to choose the one on which you think you will make the largest profit as your main home. You must inform HM Revenue and Customs of your choice of principal home within two years of buying a second home, otherwise they may decide which property is your main home.
However, you can change your mind at any time afterward.
For more information, see the HM Revenue and Customs website https://www.gov.uk/government/organisations/hm-revenue-customs or contact your local tax office for advice on your particular circumstances.
HMRC recommends that you keep the following information and documents:
- contracts for the purchase or sale, lease or exchange of the property
- any documentation that describes properties you acquired but did not buy yourself: for example, a gift or an inheritance
- details of any property you have given away or put into a trust
- copies of any valuations taken into account in your calculation of gains or losses
- bills, invoices or other evidence of payment records such as bank statements and cheque stubs for costs you claim for the purchase, improvement or sale of the property