When selling a house versus selling a flat, although from a process point of view things are more or less the same, there are certain factors that may influence the sale as well as the ultimate price you receive as the property seller.
If you need to sell a house fast or sell a flat within a short period of time, regardless of the property type, you are likely to face additional challenges with the clock ticking and prospective buyers potentially knowing this is the case.
What Are The Key Differences Between Selling Houses and Selling Flats?
The key difference between houses and flats is the type of ownership. Generally speaking, when you are the owner of a house, it is a freehold ownership which means that you have legal ownership of the house and the ground on which it stands.
Apart from mortgage payments and overheads, there are no other payments. This means that when you are selling your house, you are selling the freehold to new buyers.
A flat, on the other hand, is sold as a leasehold. Flats are one of many flats within one building meaning that each block of flats will have various rules and regulations which govern how the tenants live.
This could include things such as pets and noise control. Additionally, there are shared areas of the building which all the neighbours will need to contribute towards such as stairwells, lifts or gardens. Unlike with a house, you own the property but you do not own the land on which it is built and thus will need to pay fees to the freeholder.
When selling a house or a flat, the general process is more or less the same. However, there are certain factors that might influence the price of a flat that do not affect house prices. Also, when you are selling a flat and get a property valuation, things like service charges, ground rent and other fees specific to flats will be considered by any estate agent and property valuer.
Understanding The Length of the Lease
Ownership of your property is for a set period only, which can be anything from a few years to decades and even to a century, depending on the length of the lease. Ultimately, the amount of time and the number of years left on a lease for any leasehold flat or property can affect the sale price of the flat or property in question.
In this day and age, the majority of property lease lengths are longer. However, it could be problematic if there are fewer years left on the lease. If your lease expires, ownership of the property will technically pass on to the freeholder who in essence, owns the land upon which the property is built (the freeholder).
If you are selling a flat, those with a short lease tend to be much harder to sell. As the lease starts to run out on a property, the value also declines. That means that if you have a shorter lease, it has less market value and will be less attractive to potential buyers.
Although the government is currently introducing a new policy to make it easier to extend a lease, currently it is still very expensive and can be a lengthy process.
Why Service Charges Are Important
When you buy a flat, your costs do not end with the sale, in the way they do when you buy a house. Not only have you paid out for the property itself, you will need to continue to pay a service charge to cover the maintenance of the building. This could mean the cost of a lift, maintenance of a garden, and building insurance among other things.
The more services there are in your building, the higher your costs are likely to be. In the UK, typical service charges for flats tend to be between £1,000 to £2,000 annually. However, this could be more in specific locations or for new-build flats as well as any luxury apartments.
When you are selling a flat, on the one hand higher service charges can be indicative of a nicer residence as it may mean that those responsible for the building are taking care of its upkeep. It could also mean that there are additional services such as a concierge, a lift and grounds for the residents.
However, a higher-than-average service charge could also make it harder to sell as prospective buyers would be paying more in the long term.
What is Ground Rent?
Ground rent is what flat-owners pay to the freeholder of the building. The value of the ground rent is determined by the terms of the lease and can be anything from a peppercorn (no payment) up to any amount stipulated by the landlord. This means that those who have a higher ground rent may struggle when it comes to selling their flat. For any flat or property which is subject to ground rent, if you need to sell your property, you must be aware of how much ground rent is paid on a monthly or annual basis.
Ground rents can be on a fixed rate basis or can increase over time according to a formula; if it is the latter, it can be more difficult to predict future costs and can create uncertainty for prospective buyers. However, from July 2022, ground rents are set to be abolished on new leases.