Selling an HMO

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Houses or flats that are home to more than household but that share common areas are defined as houses of multiple occupancy (HMO) that are subject to specific rules whenever someone wants to sell their part of the property. The guide below offers important explanations of all aspects of owning and selling an HMO, including advice on the speediest way to sell.

1. What is an HMO?
2. The different types of HMO
3. How to calculate the value of an HMO
4. Which documents are required to sell an HMO?
5. What is the best way to sell an HMO?
6. Will LDN Properties buy HMO property?
7. Advice to help sell your HMO fast
8. Frequently asked questions about HMOs

What is an HMO?

Generally, HMOs are residential buildings in which there is one or more common areas, such as a kitchen, shared by several separate households all living in the same property. These are typically larger buildings that the owner has divided into individual units that are rented out to separate unrelated tenants who still share certain rooms, according to the UK government.

The first legal definition of HMOs in the UK was established in the Housing Act of 1985, which was a law approved by Parliament and enacted that year. The law said that an HMO is “a house which is occupied by persons who do not form a single household.”

A few years later, in 1989, the government adopted the Local Government and Housing Act which broadened the definition of an HMO. The definition then also included any building where there is part of a property that would not otherwise be considered to be a house, and which was not built originally or adapted later for use as a single occupation household.

Following the 1985 and 1989 laws, the government has adopted subsequent laws and rules to further define HMOs, establishing a comprehensive definition of HMOs, as well as creating categories for different types of HMOs subject to varying requirements.

As stated on the government’s website, and HMO has the following two characteristics:

• The tenants share a kitchen, bathroom, or toilet
• There are at least three tenants living in the property and more than one household

Of course, this also raises the question of how the government defines the term “household” for the purposes of an HMO. The official definition is that a household is either one person or more than one member of the same family living in the same home.

There is also a specialist magazine HMO UK containing the latest news and legal guidance whether you own or looking to sell an HMO.

The different types of HMO

As a result of the various changes to laws and regulations in the UK over the last couple of decades, homeowners might live in one of several different types of HMOs.

The generally used definition of an HMO is a property that has the following elements:

• Three or more tenants
• More than one household
• Some common or shared rooms or facilities

And HMOs can further be defined as being one of the following three categories:

• Small: HMOs with three to six bedrooms
• Medium: HMOs with six to nine bedrooms
• Large: HMOs that have nine or more bedrooms

When you’re trying to sell your HMO, if it qualifies as a small property then it will likely be valued as a residential building whereas medium and large HMOs might have their valuations be income-based, meaning they are assessed on how much you make from the HMO.

How to calculate the value of an HMO

It can be more complicated to value an HMO compared to a single household house or flat because unlike those types of properties, HMOs are typically assessed a value as a business.

As a result, most property pricing experts will assess the value of an HMO not on the physical value of the building but instead on the amount of income that it makes.

Note that there are exceptions to this general rule, for example if you own an HMO that is a small property that could alternatively be used by one household as a single family home. In such instances the house could be assessed on its traditional physical value.

Given the complications involved with selling an HMO, you might want to contact a qualified property valuer so that they can tell which approach is right for your home. Getting an incorrect valuation at the start of the selling process can create significant problems later on, so it’s best to avoid this outcome entirely by having the right price estimate from the beginning.

Which documents are required to sell an HMO?

When you are ready to sell your HMO, it’s important that you have all of the relevant documents in place upfront. This will help to simplify the sale process and to avoid any complications later on if a document is found to be missing and you have to spend time finding it.

Below are the documents that you should ensure you have before you start the selling process:

• Floor plan of your HMO
• Fire alarm certification
• Building regulation certification
• HMO license certification
• Planning documentation for your HMO
• Electrical safety certification
• If available, your RICS valuation
• Your HMO’s rental schedule
• The HMO’s management contract

What is the best way to sell an HMO?

As with all other types of properties, when you are looking to sell an HMO you typically have three choices. You could try using a specialist estate agent, you could try entering your home for sale at a property auction, or you could sell to a fast cash buyer like LDN Properties.

Selling your HMO with an estate agents

This can be a lengthy process because there are no deadlines associated with selling your home through an estate agent. It’s not uncommon for homes sold this way to remain unsold for many months or perhaps longer still in worst case scenarios.

Given the complicated nature of HMOs, you’ll find that the average high street estate agent will not be willing to try selling the property as they won’t have the expertise necessary to find the right buyer. And those estate agents that have sold HMOs in the past likely still haven’t sold many of them, so they might not know the best way to advertise them and find buyers.

Even if you are able to find an estate agent who specialises in selling HMOs, you will still have to agree to host viewings at your home where potential buyers visit the property to inspect it before deciding whether to make an offer to buy it. These can not only be very inconvenient, but they can also take a lot of time, adding further delays to the process of selling your HMO.

And estate agents will also charge you commission for selling your property, so you’ll have to deduct these potentially large fees from the total amount of profit you can make from the sale.

Considering a property auction to sell your HMO

An alternative to using an estate agent is to try entering your HMO for sale at a property auction. The company handling the auction will market your home and schedule a date for when the auction will take place. Some homeowners like this method of selling because having a specific date for the auction gives them some certainty about when their property will sell.

You’ll be asked to agree to a minimum reserve price for selling your home, and if you get a bid at that level then that is considered to be a legally binding agreement to buy your property. The goal is that so many people are interested in your home that they engage in competitive bidding, where they keep trying to outbid each other. This can in some cases raise the sale price by a large amount over the reserve price, which could help you make a lot of profit from selling.

However, there’s no guarantee that anyone will make a bid higher than the reserve price, so you might have to settle for that. If the reserve price is lower than the price at which you truly want to sell your house, selling at a property auction might not be the best option.

And you will also have to pay the auctioneer commission for selling your home in the event of a successful bid, although you can sometimes pass this cost on to the winning high bidder.

There can be some delays associated with selling your home this way, including a delay between the date that you enter your home for sale in the auction and when the auction actually takes place. And you’ll also have to wait a few weeks during the time that the auctioneer markets your home in order to generate interest from potential buyers ahead of the auction. Whilst an auction can be speedier than selling your HMO through a specialist estate agent, you might still be facing a wait of many weeks or more if you sell your HMO at a property auction.

Fast cash home buyer

We’ll explain in more detail below the process for how LDN Properties can quickly buy your home, but this is perhaps the speediest option for selling your HMO.

A fast cash buyer can give you a simple way to get a fast and fair cash offer for selling your HMO, with the goal of completing the sale within a few short weeks. That’s much speedier than selling your home through a property auction or a specialist estate agent.

Will LDN Properties buy HMO property?

Yes. We launched our home buying business in 2003 and ever since then we have given homeowners a straightforward, zero-hassle and stress-free way to receive competitive and speedy cash offers for selling all shapes, sizes, and conditions of houses and flats.

A major benefit of selling your HMO to LDN Properties is the fact that we will never charge you any fees. This means that you can count on receiving the full proceeds from the final purchase price offer that we make on your home, unlike estate agents and property auctioneers who will charge you commission for selling your home that will reduce your overall profit when selling because you’ll have to subtract those fees from the sale proceeds.

Advice to help sell your HMO fast

If you are interested in quickly selling your HMO, contact our friendly team of experts. We should be able to give you an initial fair cash offer for buying the property within the first hour of talking with you, and we’ll give you at least seven days to consider whether to accept it.

Should you wish to accept our offer, we will then have one of our representatives visit your property. This gives them the chance to inspect it in person, and it also lets you ask them any lingering questions that you might have about selling your home.

And finally we will work with your solicitor to complete all of the necessary legal documents to buy your home, then we’ll exchange contracts and pay you the proceeds. The entire process should take only a few weeks from the date that you first get in touch with us.

We believe that this is often a much faster timeline than if you try to sell your HMO through an estate agent or at a property auction, which are options that can take a very long time.

Frequently asked questions about HMOs

LDN Properties is happy to answer any questions that homeowners might have about all aspects of selling their houses or flats. Below you will find our answers to some of the most common questions that we are routinely asked by people looking to sell HMOs.