Selling A House - Don't Be Blind To The Risks

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Selling a house quickly..controlling the risks

Selling a house, is by definition, risky and uncertain. This is true regardless of how you sell your house. When you want to sell quickly, are buying at the same time or are working to fixed deadlines the risks are even greater.

It surprises us that so much is written about the risks involved in buying a house but scant attention paid to the risks of selling one! Why should selling be any less risky?

Selling a house successfully depends on carefully identifying the risks and controlling them as best you can – what risk management professionals call ‘mitigating’ the risks.

After the risks associated with different ways of selling a house are understood, you can pick which option is best for you and manage the risks associated with your particular sale accordingly.

Selling a house - the risks involved

When you're selling a house it helps to group risks together under certain themes. After all, there's no point in spending 80% of your time attempting to influence something you have little direct influence over, is there?

There are a number of possible ways of doing this, but for the purposes of selling a house lets keep things simple, and group the risks into three:

those that are specific to the method of sale

those that are particular to your individual house sale

those which you cannot control or influence

Of the three types of risks listed above, you'll be able to influence risks in the first two groups either directly or indirectly.

How risky is your house sale?

The table below identifies possible risks associated with different ways of selling a house. Some are common to the method of sale, others are specific to an individual house sale. Notice, we have excluded those risks which you have no hope of influencing, even indirectly such as interest rates.

Your House Sale - Identifying The Risks

Estate agents Selling privately Property auctions Cash property buyers

Risks

1 Agent selection Your valuation and pricing Location of property Reason for selling

2 Presentation of property
Presentation of property Type of property Your valuation of property

3 Agent's level / type of marketing Choosing the best buyer
Auctioneer's appraisal Your research on buyers

4 Agent's qualification of buyers Your qualification of buyers Your valuation and research Your level of motivation

5 Buyer's chain Buyer's chain Auction location Your personal circumstances

6 Agent's level of motivation Your negotiation skills Special conditions Your timeframe for selling

7 Level of asking price

Your project management skills Auctioneer's marketing Cash buyer's commitment

8 Your negotiating position Lender's valuation Availability of legal pack Cash buyer's flexibility

9 Lender's valuation Buyer's assessment of you Level of reserve price % below market value

10 Survey issues Effective promotion / advertising Your pre-auction
marketing Your requirements

The table is intended as a starting point only. You can adapt it for your house sale. The point is to identify the potential risks in the first place – and plan accordingly. There are many occasions when the process of selling a house might tick over smoothly, clockwork fashion but rarely by leaving things to chance. This presents you with an opportunity: Plan to sell.

Don't be blind to the risks - manage them!

Selling a house means identifying and influencing those risks which you can control and those which you can influence. The aim of controlling or influencing the risks is to lessen their impact on your house sale as shown in the table below.

The examples in the table are illustrative only, but you can begin to see how you can build up a plan of how to minimise the potential down-side of any house sale.

comparisontable

Controlling The Risks Of House Selling

Risk Controls

1 Valuation and pricing

Place flat in the middle of the range shown in the Hometrack Report.

Viewed two comparable properties at around the same price for sale on the same road.

2 Buyer's chain

Due to our circumstances we will only accept offers from chain free buyers

3 Negotiation skills

Research shows price is reasonable.

State 'no offers' on the advert.

Ask all prospective buyers to justify their offer in writing if under the asking price.

If under asking price ask for cash payment to take flat off the market as security.

Offer to make concessions on non financial issues such as timing of exchange & completion.

4 Presentation of property

Make small repairs to kitchen units

Repaint the spare room and buy a bed for the 'office'

Spend a weekend having a good clear out

Repaint front fence

Let's dig a little deeper.

If your house is likely to be attractive to first time buyers then there are a couple of issues to consider. On the one hand a first time buyer can buy quickly. On the other, if they require a high income multiple to secure your property then this may represent a considerable risk as would a buyer putting down less than a 10% deposit. You have to stay alert to the fact that first time buyers often have particular financial requirements.

Another source of risk is the lender’s valuation. You can only influence this indirectly. Making sure your property is sensibly priced in the first place goes a long way to heading-off this kind of problem.

In the table above, the seller has decided to control the impact of the buyer's chain by only accepting offers from chain-free buyers.

External influences such as interest rate rises you can’t control or influence (obviously) but they will tend to have some level of impact on the market as a whole. Issues which are specific to the location of your property such as local factory closures can impact local demand for certain types of property and you may have to react accordingly.

We have experienced this problem ourselves. In our case two significant plant closures had a significant impact on the local economy, dramatically reducing local demand for first time buyer properties.

How much control do you want?

Different ways of selling a house offer you different levels of control.

It is useful to consider how much control the different ways of selling a house provide and what types of control you must give up.

Arguably, the more you rely on other people to help, the less direct control you have. But there is something to be said about leaving it to the experts..And if you have decided to sell your house yourself, your performance and motivation become one of the major risks!

We're not suggesting you attempt to manage all the risks but you should allow for those which could 'make or break' your sale.

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