How to Sell an HMO
Estimated reading time 9 minutes
Selling an HMO is a far more complex process than a normal property sale. Everything from the initial valuation method to the paperwork required for a sale is exclusive and unique to HMO sales. It can easily get confusing, and you need your facts straight before you start.
Cash house buyers are the easiest way to sell an HMO property. At Gaffsy, our experts will talk you through every step of the process, but should you want to learn more about selling an HMO first, this article will answer your questions.
What is an HMO property?
An HMO is a House in Multiple Occupation. According to the Government website, your home is a House in Multiple Occupation if three or more unrelated people live there forming more than one household PLUS you share a toilet, bathroom, or kitchen with other tenants.
There is also a separate classification for a large HMO. Your home will count as a large HMO if at least five tenants live there, forming more than one household, and if you share a bathroom, toilet, or kitchen with the other tenants.
An HMO is different to a household where the residents are married or cohabiting or are related as family or stepfamily.
HMOs can include shared houses, hostels, halls of residence, and employee accommodation. HMOs have different requirements for health and safety regulations and maintenance than other types of rental properties which are occupied by one household. A large HMO, with more than five tenants, requires a licence from the local council. Some local authorities also require a licence for even small HMOs.
How can I check if a property has an HMO licence?
In most local authorities, an HMO license must be clearly displayed within the communal areas along with the name, address and telephone number of the licensee or property manager of the premises. In addition, a copy of the current gas safety certificate must be on display. If you want to check whether a property has an HMO licence, you should look around the communal areas.
How do I get an HMO licence?
To obtain an HMO license you need to ensure the property is suitable as a House in Multiple Occupancy. It’s mostly about meeting the health and safety HMO requirements. Some HMO requirements may include the following: installing fire doors, supplying fire blankets and fire extinguishers, and installing specific types of door handles and locks (e.g. Thumb Turn Locks). The HMO requirements will vary from council to council, and you should be able to find the necessary information on the website for your local authority.
If you’re not sure whether your HMO needs an HMO licence before it gets put up for sale, you can contact your local authority council. Often you will be able to find the information on their website, or you can contact someone at the council for more detail or for clarification.
HMO licences must be renewed before they expire. They usually last for five years, but this can vary by local authority. Landlords will also have to obtain a license at a cost of between £100 to £200 per year.
Differences between selling an HMO and a regular property
HMO sales documents
When you put up an HMO for sale, you will need to ensure you have all the relevant documents ready. This gives potential buyers the confidence to make an offer as they will have complete transparency on the property.
HMO sales documents include but are not limited to:
- HMO floor plan
- Building regulation certificate
- HMO planning permission
- Fire alarm certificate
- Gas and electric safety certificates
- HMO licence certificate (if a large HMO)
- EPC certificate
- Tenants’ details, along with tenancy agreements and records of rent paid
- Your HMO accounts
You should aim to sell your home through an experienced HMO estate agent or cash house buyer. They will be able to advise on exactly what documents will be required. You could also speak to a solicitor about what will be needed to sell your HMO.
HMO insurance information
As you would expect, the terms of your HMO insurance policy will be different to a single property. Make sure to register your property as an HMO property for sale, as if you don’t, you will jeopardise your HMO insurance cover. There is a chance you may have to examine the replacement cost of items in your property and include this in any potential HMO insurance quote.
HMO mortgages
Crucially, HMO buyers need to be able to raise the finance to buy your HMO or be cash buyers. Ideally, they should already have the funds to buy your HMO or an HMO mortgage in principle. Getting an HMO mortgage is usually more difficult and expensive than getting a standard residential mortgage, and the buyer will typically need to go to a specific HMO lender. This is partly what can make selling an HMO more difficult and is often why sellers look for cash buyers instead.
At Gaffsy, we use our own funds and can make same day decisions on anything offered. Get your free cash offer for your HMO today.
Tenants
In most cases, when someone buys an HMO, they expect the tenants to stay on in the property. In fact, it can be easier to sell an HMO with tenants already in situ. It can be beneficial to inform your tenants that you will be selling the HMO early on in the process. You can help to give them peace of mind that they will be able to continue to live in the property.
How to value an HMO property
It can be tricky to value an HMO property for sale. In most cases, a House in Multiple Occupation is not valued as a property as a normal house would be – instead, an HMO, especially a large HMO, will be valued as a business. The value of an HMO is usually based more on the income it generates and not exclusively on its bricks-and-mortar value.
There can be some exceptions to valuing HMOs as a business. For example, a small HMO for sale that could be used as a single household home may be valued as a traditional property instead.
When putting up your HMO for sale, it is important to value your House in Multiple Occupation accurately and aim to be realistic about your asking price, as incorrect valuations will cause problems with the sale later. At Gaffsy we will make you a no obligation cash offer for your HMO, so you have the security of a guaranteed cash buyer at no cost to you. Get in touch today to speak to the team about how we can help if you’re selling your HMO.
What is the process of an HMO sales transaction and how long does each process take?
With regard to how long the process of selling a house of multiple occupancy takes, it depends on the method you choose. If, for instance, you have chosen to sell your house of multiple occupancy at auction, it will take at least twenty-eight days for the sale to complete. This takes into account marketing and is only actionable if there are bids made on your house of multiple occupancy.
You can choose to sell your HMO on the open market. This can be a more complicated process. You will first have to find an estate agent who has the experience to sell HMOs – not all estate agents will take on HMO properties. Once you have an estate agent, they will conduct a valuation where a price will be agreed. Your HMO will then be marketed. It can take a long time to sell an HMO on the open market, as the pool of buyers for HMOs is smaller than for other types of property – often it will take many months to find a buyer and complete the sale. Conveyancing can also take a long time, as there will be more moving parts with an HMO than compared to a traditional property.
Alternatively, you could sell your HMO directly to a cash buyer, which is a quick and guaranteed way of cementing a sale. At Gaffsy, we can provide a no-obligation cash offer within 60 minutes and can complete the purchase quicker than most estate agents, or we can work to your required schedule.
How to secure a quick sale for an HMO
Selling an HMO can be a lengthy, complicated process. However, there are a few steps you can take to help the process move along.
The first thing is to ensure you have all the required documents, which we detailed earlier. You should also be fully transparent with any potential buyers about the property. If a potential buyer finds an issue with the MO that you haven’t declared, this can cause huge delays, result in price negotiations, and even result in the buyer pulling out from the sale.
Another way to secure a quick HMO sale is to choose the right buyer. Ideally, your buyer will be experienced in buying HMOs and will know what is required, especially around licensing and running an HMO. You may find your HMO gains interest from buyers who are interested in the potential profit of an HMO, but they do not know about the details or managing an HMO. This can result in a longer sales process or even with the buyer eventually dropping out of the sale.
You can further help to secure a quick sale for your HMO by ensuring the property is in good condition. You should undertake any repair work that needs doing and make sure all the safety certificates and licences are up-to-date and valid. If a potential buyer knows the property adheres to all necessary regulations and won’t need lots of money spent on it to get it habitable, it can make it more appealing.
* If you need to sell buy-to-let property/HMO quickly, speak to our team today. We can sell a house quicker than estate agents and not have you waiting to complete your property goals.
* You will benefit from our experience of purchasing buy-to-let properties and HMOs, whilst avoiding costs such as agents’ fees, estate agents’ charges, solicitors’ fees, clearance costs, utility charges, mortgage payments and cosmetic repair costs.
* Get the ball rolling with a free cash offer today.
Useful Links:
