Pros & Cons of Selling a Vacant Property
As an agent who sells in an area where there is a high percentage of investment ownership, I often get asked about whether it is better to sell a property while occupied, or to market the property vacant. This question is pertinent, however, for both investment owners and live-in owners or “owner-occupiers” – Often, an owner occupier might have bought another property and is toying with the idea of moving into their new home first and then listing their existing property after the move. Whichever the case, there is no hard-and-fast rule to this and the answer to this question will depend mostly on the property itself and your own personal circumstances.
DO HOMES LOOK BETTER FURNISHED OR UNFURNISHED?
This depends on the property. In most cases, homes look better furnished, although it is best to have them sparsely furnished as cluttered homes appear smaller and give the impression of being run down. It is common in higher priced or prestige markets to hire home stagers and take out furniture packages for vacant homes to give them a bit of extra life and make them feel like a real “home”; Vacant properties often feel cold and sterile. This can be expensive however so if you are on a tight marketing budget, perhaps consider having some ‘virtual’ furniture added to your marketing images in post production to give your marketing pieces a bit more oomphh.
Image from BoxBrownie – For more information on virtual furniture, visit http://www.boxbrownie.com/virtual-furniture
If your property is a bit dated and tired, having it unoccupied or unfurnished can really put its flaws on full display. With no furniture or personal effects to mask it’s imperfections, buyers will notice every little stain on the carpet, every little scuff on the walls and every little maintenance issue that remains unattended. This will cause them to lower or “buffer” their offer price as compensation or in some cases, put them off the property altogether. If you want to sell your home vacant, prepare yourself that you may need to invest a little in bringing the property up to a reasonable condition prior to marketing.
SELLING AN INVESTMENT PROPERTY WITH TENANTS
Selling a property that has tenants occupying can often be a tricky business. Some tenants are lovely people and are more than happy to cooperate and accommodate your sales campaign – However some tenants you will find to be extremely difficult. Access is a constant problem, as some prickly tenants may refuse to allow access at any time when they are not home. This is hardly convenient in terms of your agent being able to get their best buyers through. Often they will not make any effort to clean or present the house for buyer viewings, which will impact not only your chances of a sale but the price you will most likely get.
It is worth noting as well that tenants in Queensland have the legal right to refuse to allow you to use any marketing images which contain their possessions – Which will generally prevent any internal photos from being used for advertising. They can also legally refuse to allow the agent to conduct open houses and on-site Auctions, thus making the entire process very restrictive.
If you are lucky enough to have a friendly and cooperative tenant, then selling while they are still living in the property is a definite possibility. This will help you in terms of cash flow – You will still have rent money coming in – But remember that the expiry date of the tenants’ lease is something that is fixed and generally cannot be changed. If their lease is up for renewal within the next few months, then the timing might be right, but if they have a 12 month lease in place then you and your agent will need to find a buyer who is willing to take the property with the tenant in place.
If you have a prickly or particularly messy tenant, then it is best to get them out prior to marketing the property. This will give you an opportunity to conduct some maintenance and thrown some fresh paint and carpets in the place to boost the presentation and hopefully increase your potential sale price. It will also ensure your agent has unrestricted access to the property which, once again, will significantly increase your chances of a sale.
THE CASH FLOW ISSUE OF HAVING A VACANT PROPERTY
If you do decide to move your tenants on and advertise the property vacant, you then have to deal with the conundrum of not deriving any rental income from the property. If there is a mortgage in place, and the interest payments are dependent on the rental income, this could present a serious cash flow problem for you as you are responsible for making up the payment from elsewhere.
One thing you can do to deal with this is contact your lender and find out what options they are willing to offer you – Some banks will allow you to take a “payment holiday”, whereby all of your interest payments are deferred until the sale settles. All outstanding payments are then deducted straight from the settlement proceeds. This allows the bank to recoup their money and solves the cash flow issue for the vendor, but not all of them will agree to do this so speak to your bank first.
As always, feel free to contact us for expert advice on all things real estate.
‘Til next time, ciao 🙂