Sam Kinloch, Director & Senior Auction Appraiser at Clive Emson Auctioneers provides a thorough insight into selling uninhabitable property in the UK and why auction might be your only option. If you've a property that fits this criteria, then I highly recommend that you read.
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The term uninhabitable is used throughout mortgage lending, where banks and other lenders apply specific criteria to decide whether a property a buyer wants to secure lending against is deemed habitable - or suitable to live in - within its current condition. But can uninhabitable houses be sold?
An auction may be the only viable option for selling an uninhabitable property due one main reason: Uninhabitable properties may not qualify for traditional financing, limiting the pool of buyers who can purchase through conventional means. In this article, we review why it can be difficult to sell an uninhabitable property and how property auctions could be ideal if you’re looking to sell.
Firstly, what exactly does uninhabitable mean?
While exact policies may differ, it is normal for a property to be categorised as uninhabitable where there isn't a reliable water supply, the home lacks either a kitchen or bathroom, the structure isn't watertight, or there are drainage or damp issues.
It is worth clarifying that these factors are subject to interpretation. Although the British government introduced a law called the UK Government Homes (Fitness for Human Habitation) Act 2018, which applies primarily to rental properties, a lot may depend on a lender's opinion and position, making it difficult for interested buyers to secure the necessary lending.
What makes a house uninhabitable for a mortgage in the UK?
In the UK, a house is considered uninhabitable for mortgage purposes when it fails to meet a lender’s minimum property standards. Mortgage lenders need to be confident the property is safe, structurally sound and suitable to live in without major immediate works.
Below are the most common reasons a property may be classed as unmortgageable or uninhabitable.
- No working kitchen
- No working bathroom or WC
- No running water or drainage
- Serious structural issues (subsidence, major cracks, roof failure)
- Severe damp, rot or widespread mould
- Unsafe or non-functioning electrics
- No fixed heating system
- Dangerous gas installations
- High fire risk or inadequate fire safety
- Unsafe cladding (especially flats)
- Property not weather-tight
- Derelict or abandoned condition
- Serious legal or title defects
- Unauthorised alterations
- Missing planning permission or building regulations approval
- Short lease (typically under 70 years)
- Classed as unfit under the Homes (Fitness for Human Habitation) Act
Why Is it So Difficult to Sell a ''problem' Property After It Has Been Deemed Uninhabitable?
As we’ve indicated, the term uninhabitable is somewhat subjective.
Even if somebody has been living in a property for several years, it may become complex to sell that property later on if there are l defects, issues with water ingress, or where the home doesn't have a well-segregated kitchen area, as a few examples.
The primary issue isn’t necessarily the interest in a property as a renovation or modernisation project but rather the difficulty most homebuyers would have finding mortgage lending against the home.
A Lender assesses the property value as lower than the amount the buyer would need to borrow to cover the purchase cost.
Other considerations can include:
- The challenge of conducting viewings, particularly where private buyers are looking for a home to live in and may perceive a property that is currently uninhabitable as an unattractive option.
- The potential of selling beneath market value to secure a sale – even if other aspects of the property, such as location, attached land or views, would make even the empty plot of land far more lucrative.
- Assumptions about the structural integrity of a property, where even if it is fully watertight and of sound construction, buyers might perceive that a property listed as uninhabitable is otherwise a costly renovation project.
While these factors might mean some sellers assume they have to accept a very low offer to be able to sell a property, a home that is in its present state uninhabitable may also be an attractive investment for those with experience in renovation and property development.
An uninhabitable home will inevitably cost less to buy than if all the repairs or improvements had been completed, which makes it an appealing opportunity for an investor keen to find homes in a prime location with the potential to renovate.
Developers looking to construct new residential homes often keep an eye out for uninhabitable auction property listings.
They know that they have a superb opportunity to demolish and rebuild or modernise an outdated home, achieving outstanding returns on the original investment far above that associated with a standard habitable property.
Why Sell an Uninhabitable Home at Auction?
While the exact condition and location of the property will always have an impact, the only real reason it is hard to sell an uninhabitable home is that mortgage lending is very tough to come by – if not impossible.
Sellers who remove that parameter from the equation often find that selling is far more straightforward than they had anticipated, and the real emphasis is on thinking about the types of buyers their property is marketed to, rather than the condition and structure of the property itself.
Selling an inhabitable home via auction is often the best route to selling because:
- Property auctions attract buyers looking for opportunities: Investors, buy-to-let landlords, homebuyers, renovation enthusiasts and developers look for properties that present an opportunity to renovate, or rebuild from scratch, often prioritising excellent locations close to major transport links, cities, business districts or universities. The fact that the property is uninhabitable isn’t a concern for some!
- You can sell quickly: Sellers keen to move quickly and without unnecessary stress also choose auctions for the certainty and expediency of the process. Rather than listing a property and waiting for months, if not longer, to find a viewer, an auction is completed in as little as a few weeks, from initial marketing through to the auction day itself.
- Best Price in Current Condition: Competitive bidding can potentially drive up the property price, particularly if multiple bidders are interested. This can sometimes result in a higher selling price than might be achieved through a private sale, especially for properties that are hard to value conventionally due to their poor condition.
All this creates an optimal setting for sellers, where every bidder has already shown interest, often leading to competitive bidding where prospective buyers are unwilling to reduce their offer to allow another bidder to secure the acquisition.
Is it Worth Repairing or Improving an Uninhabitable Home Before Trying to Sell?
The right course of action very much depends on your objectives and priorities, and if you’d prefer to spend a few months restoring a property that has fallen into disrepair or adding a new kitchen or bathroom, those are certainly options open to you.
Many sellers find that the cost of making more extensive repairs, such as replacing a roof that is no longer watertight or addressing structural issues, commands a significant budget and would take far longer than the time they’d like to spend waiting to secure a sale.
The choice is yours, but there is no reason you cannot sell an uninhabitable home for a fair price at auction, using the captive buyer demographic that frequents auction sales to achieve the best possible price without delay or financial outlay.
Expert Advice on Selling an Uninhabitable Property Via Auction
If you're new to property auctions or unsure of the auction process, the first step is to contact the Clive Emson team. Our experienced advisers can explain how a property auction works from start to finish, clarify any queries you may have, and offer an independent opinion as to what we’d expect your uninhabitable property to achieve at auction.
Professional marketing is essential, where reputable auctioneers have years of knowledge of the investment property market and can advertise the particulars of your property to an established audience – driving interest, and potentially your final sale value.
Key takeaways:
- An uninhabitable property typically lacks essentials like a reliable water supply, kitchen, and bathroom, or has structural issues like water ingress or dampness.
- These factors complicate securing mortgage lending, making traditional sales difficult since the property's condition and valuation may deter typical homebuyers and lenders.
- Selling an uninhabitable property at auction is effective because it removes the need for mortgage approval, attracts a broader base of interested parties and facilitates a quicker sale process.
- Repairing an uninhabitable property before sale might not always be worth the investment and time, particularly if the seller is looking to quickly liquidate without significant upfront costs.
- Auctions can maximise the property's price through competitive bidding, even for properties hard to value conventionally.
Are you looking to sell an uninhabitable property and quickly?! Get in touch today and get a FREE appraisal to find out how much you can sell your property for.
About the Author
Sam Kinloch
Clive Emson Auctioneers
Director & Senior Auction Appraiser
FNAEA MNAVA
Sam’s career in the dizzy world of property auctions began when he hung up his chainsaw and headed in from the forest. Joining the Clive Emson team in 2003, Sam now sits on the Board of Directors and has been instrumental in the adoption of online auction services.