Sitting Tenant Question

[GT196]

I was wondering if anyone knew what percentage of market value houses traded at when they have sitting tenants please? The house was sold last year with a sitting tenant, but it is back on the market now without one at 50% more than it sold for. Seems a little high to me, but then I have no idea about it at all. Thanks for the help

[Wings]

GT196 said:

I was wondering if anyone knew what percentage of market value houses traded at when they have sitting tenants please? The house was sold last year with a sitting tenant, but it is back on the market now without one at 50% more than it sold for. Seems a little high to me, but then I have no idea about it at all. Thanks for the help

Depends on the type of tenancy, Protected or Assured Shorthold Tenancy Agreements, amount of rent being paid by the tenant. In the case of a Protected tenancy and a pittance rent being paid, then 50% increase in the value of the property might not be high.

[GT196]

thanks very much for the help. I dont know the details unfortunately. The only thing I know is that there was a tenant and now there's not.

[Davi]

If it's a sitting tenant then they mean protected - i.e. you can't kick them out, they have expansive rights. It also means you usually can't get anything like market rent for them either, as such are difficult to finance etc etc etc. Net result is they suffer a substantial reduction in value.

30-50% increase would be common upon the removal of a sitting tenant.

Edited by Davi on Wednesday 1st July 09:21

[GT196]

I have been led to believe that it was a sitting tenant. I dont have any information about how much it cost to get them out though. Thanks again for the help. It is greatly appreciated.

[The Tea Boy]

Davi said:

If it's a sitting tenant then they mean protected - i.e. you can't kick them out, they have expansive rights. It also means you usually can't get anything like market rent for them either, as such are difficult to finance etc etc etc. Net result is they suffer a substantial reduction in value.

30-50% increase would be common upon the removal of a sitting tenant.

Edited by Davi on Wednesday 1st July 09:21

for instance one of our landlords has a tenant in a flat whom is protected and only paying £275pcm whereas the tenant upsatirs is a normal AST and is paying £600pcm so thats what makes the difference in the sales cost. and also a tenant on a normal AST can be booted out with a section 21 notice.

Matt

[mk1fan]

Is the asking price in line with the local market? If it is then you're wasting your time answering this as it makes no difference to the current value.

If the asking price is way way over the local market then again answering this is a waste of time.

[Davi]

mk1fan said:

Is the asking price in line with the local market? If it is then you're wasting your time answering this as it makes no difference to the current value.

If the asking price is way way over the local market then again answering this is a waste of time.

not really, the first part of the original question was:

I was wondering if anyone knew what percentage of market value houses traded at when they have sitting tenants please?

which can be answered entirely independently of the second part and give the OP / other readers information for future reference... there is always a reason to answer a question.

[GT196]

Unfortunately I am trying to decide what I think the market value of the house is. I know what it last sold for (6 months ago) and what the seller wants for it now (50% more). What I dont know is how much it cost to get the tenant out - he didnt seem to be there for very long - and whether that cost justifies the increase in price. The seller has increased the house price by £800k to put it into context.

[The Tea Boy]

Davi said:

I was wondering if anyone knew what percentage of market value houses traded at when they have sitting tenants please?

its a very good question!! If we all knew the answer we could also be onto a good thing, again it depends on how much the sitting tenant is worth
eg; you could have a sitting tenant who is 45yrs old and could live there for the next 40 years, then again he might get hit by a bus in a weeks time in which case your onto a winner value wise.

Hope that makes sense

Matt

[Davi]

GT196 said:

Unfortunately I am trying to decide what I think the market value of the house is. I know what it last sold for (6 months ago) and what the seller wants for it now (50% more). What I dont know is how much it cost to get the tenant out - he didnt seem to be there for very long - and whether that cost justifies the increase in price. The seller has increased the house price by £800k to put it into context.

the cost of removing the tenant is utterly irrelevant as alluded to above - if he is now out, you only need to know one thing - what is the market value of the property. You'll only learn that by looking at close comparables in the area - that is, what they sold for, not what the agents have them on the market for!!!

[mk1fan]

GT196 said:

Unfortunately I am trying to decide what I think the market value of the house is. I know what it last sold for (6 months ago) and what the seller wants for it now (50% more). What I dont know is how much it cost to get the tenant out - he didnt seem to be there for very long - and whether that cost justifies the increase in price. The seller has increased the house price by £800k to put it into context.

The cost of removing the tenant is irrelevant. Are there similar properties for sale in the area? What are they valued at? Have similar properties sold recently and for how much? If the local market value is 2.5mil then the asking price is 'right', if the local market value is 1.8mil then the asking price is too high. The value would certainly not be the previous sale price plus the cost of removing the tenant.

Davi beat me to it

Edited by mk1fan on Wednesday 1st July 14:04

[GT196]

Davi, I suppose you are right. I am just having a hard time valuing it and a bit tired of being lied to by the agent. Thanks for the help.

[Davi]

I sympathise, it's a situation my clients often end up in! If you're seriously interested, at that value I'd get a basic mortgage valuation done - it'll cost you a bit (unfortunately the higher the value the higher the cost due to PI costs) but if you can't find comparables then it's your only real option to get a basic footing on value.

There are various websites that'll show historic sale prices but they're all a bit out of date usually, and often don't give the information needed to glean if it's a reasonable comparable or not!

[mk1fan]

And the recent market changes don't help with establishing value either.

At the end of the day are you looking just to get a bargain or is this going to be a home?

[GT196]

It is/was going to be a home, but the house is pretty much destroyed at the moment. It needs to be rebuilt almost totally. That is another reason I am having a hard time pricing it.

[Davi]

GT196 said:

It is/was going to be a home, but the house is pretty much destroyed at the moment. It needs to be rebuilt almost totally. That is another reason I am having a hard time pricing it.

worth spending out then on a valuation. Even if it is £3-4k (ballpark figures, you may get someone desperate for the work!) on a £2m spend that needs doing up, it's a drop in the ocean, and it may save you substantial amounts if it proves their price is way off the mark.

[GT196]

thats some great advice. thanks very much.

[Davi]

be worth having a chat with a few valuers - I don't know if you plan to get engineers reports, structural valuations or what if the price is right, but purely personal way I'd approach it, if it were me I'd plan out what I wanted to do on that front then talk to a few about getting a market appraisal as the starting point which could lead on etc.