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If you’re trying to sell a freehold or leasehold property during a recession, you might find it’s harder to attract buyers at your current asking price, because people are more cautious about investing in buying homes. However, if you follow some simple tips, you may be able to increase your prospects of being able to make a swift sale of your flat or house.
- What is a recession and how does it affect home sales?
- Disadvantages of selling your house during a recession
- Potential benefits of selling a home amid a recession
- Ways to make your property more attractive to buyers
- Choices for how to sell your house or flat during a recession
- Queries and answers about selling a home in a recession
What is a recession and how does it affect home sales?
The UK economy fluctuates all the time, switching from strength shown through high levels of unemployment and other positive financial indicators to a recession, where the economy is showing signs of constant, significant decline or slowdown.
During a recession there are many different consequences that can happen, including a cut in the amount of public spending from the UK government on essential services, employers might fire workers to cut costs, people will have less disposable income to spend. But for property sales in particular, a recession can cause some very significant problems to navigate.
Any economic downturn runs the risk of decreasing demand for freehold or leasehold properties, because people will be more cautious about making large investments, unsure of what the future might hold. This can reduce overall demand for properties, meaning there are fewer buyers from which to choose.
If, as a result of a recession, there is less overall demand from people for buying homes, the property market becomes what’s known as a buyer’s market – that is, people who might want to own a home have the upper hand, because sellers might be more desperate to make a sale.
Unfortunately, too many homeowners usually panic during a recession and feel that they have to cut their property’s sale price by an excessive amount in order to secure a sale, because they’re worried that the recession might linger for many years and it will be impossible to find a buyer in the future. This guide offers some important insight into how a recession may affect home sales, and how to help your property sell.
Disadvantages of selling your house during a recession
Unfortunately, there are typically more negative aspects of a recession’s impact on property sales than there are positive results.
Because recessions often make most people more cautious about spending their money, they have the effect of lowering demand from buyers for properties who are now concerned about making such a large investment at a time of economic uncertainty. And that in turn creates a number of complications for anyone who may be trying to sell their house or flat soon.
Lower sale prices: Reduced demand for properties often means that overall home sale prices plummet during a recession, because it’s now a buyer’s market – there are more people looking to sell properties and to do so urgently than there are willing buyers. This gives prospective owners much more choice when looking for homes to purchase, and the competitive nature of the market often leads to owners cutting sale prices heavily in order to attract buyers. But you can avoid this outcome by contacting a fast buyer, as they often offer more competitive prices.
Slower to find a buyer: Because recessions have the general effect of reducing demand from buyers for properties, this can make the timeline for selling your flat or house even longer than at other times. Potential buyers will likely be far more deliberative because many feel more cautious about making such a large investment as buying a property. This can result in a very long selling process if someone takes months to decide on making an offer on your home. You could instead sell to a fast buyer, as they can purchase your property within just a few weeks.
Sales may fall through: Another drawback of selling during a recession is that sales can be more susceptible to falling through before the exchange of contracts, perhaps because the buyer has suddenly experienced financial hardship, or any other reason. Unfortunately, there is nothing a seller can do to try enforcing a sale unless contracts have already been exchanged. Instead, you’ll simply have to start over with trying to find a buyer, possibly adding many months to the process.
Potential benefits of selling a home amid a recession
Although there are a number of negative aspects of selling your home during a recession, you’ll find that a handful of potential benefits might still exist that may make a sale easier.
Not all of these perks will apply for every situation, because every property sale is unique. But it’s always worth understanding the possible advantages, to help you reduce your stress when trying to find a buyer during this time. Your goal should always be to find a buyer that is willing to pay a price where you make a sale profit, and don’t have to break even or sell at a loss.
More available buyers: Just because a recession often causes a buyer’s market – where there are more people looking to sell homes than those interesting in purchasing them – does not mean bad news for the sale of your flat or house. Many people will see the potential to purchase a property at a discounted rate, and this can increase the number of people interested in buying homes. Of course, another way to secure a competitive and speedy sale even during a recession is to contact a fast buyer who will make a fair, no-fee offer for buying your home.
Paying less tax: When you sell an asset like a home, you might have to pay the UK government what’s known as Capital Gains Tax, which is a tax levied on the amount of profit, also called gain, that you make on the sale. Check with a tax expert to find out what your likely tax liability might be when selling your home.
Attract serious offers: During a recession, many people who might have thought about buying a house or flat could now be nervous about making such a major financial investment. Although this can make some people wary about placing an offer on your property, it can also increase your prospects of getting serious offers from other prospective buyers. Anyone willing to make an offer during such an uncertain economic time is much more likely to be serious about wanting to purchase a home, hopefully increasing the odds for you of securing a sale.
If you are considering selling quickly, be sure to read our separate guide containing tips and advice on selling your property as is.
Ways to make your property more attractive to buyers
Because you’ll be trying to sell your home in a potentially more difficult market, with more selective buyers who may be looking to spend less on a property, it is important that you make your flat or house as attractive as possible to anyone that might have an interest in it.
Anything that you can do to increase the perceived value of your house or flat is likely a smart move, because the more that someone is willing to pay for the property. And even better, some of the approaches outlined in this guide won’t require spending any money.
One straightforward way to make your home seem more valuable is to clean it up. For the outside of the property, this means painting over any cracks, replacing any damaged or missing roof tiles or broken windows, removing weeds from the garden and moving the lawn, and generally ensuring the exterior looks in great condition. Inside the home, this means removing clutter and tidying rooms to make them more presentable.
Although such work might not seem that important, it can have an outsized impact on how people view your flat or house. First impressions are crucial when trying to sell a property, and a dirty, cluttered home will almost always lead buyers to think it’s less valuable, which can lead to them offering a reduced purchase price that would generate less net sale profit for you.
Choices for how to sell your house or flat during a recession
One of the most important decisions that you can make when preparing to sell your house or flat during a recession is the method to use for trying to find a buyer. There are four typical choices, and they each have their own unique benefits. In addition, some of the options also have rather notable cons, such as taking a very long time to sell or requiring that you pay sizable fees.
You will usually have to opt for selling to a fast home buyer, selling on your own, selling through an estate agent, or selling at an auction. Consider the pros and cons of the various methods detailed below, and look for the method that best pairs with your needs when selling.
It might be helpful to craft a budget for the sale of your property in which you list important elements such as how much time, money and effort you’re willing to spend on selling, whether you want to pay any fees, how quickly you would like to find a buyer, and other factors. Compare these issues against the four choices to find the one that is right for your sale.
Selling to a fast home buyer
Fast buyers, such as the London-based LDN Properties, have the financial power to make immediate purchases of freehold and leasehold homes without needing to wait for several weeks or months to initially get approved for a mortgage to pay for the transaction. This reduces the time it takes to sell this way to just a few short weeks, and that includes the time it takes to pay you the sale proceeds and exchange contracts, making for a very speedy sale.
Another advantage of selling this way is that the trustworthy quick property buyers will never make you pay any commission when purchasing your flat or house. That means you are assured of receiving the full sale proceeds.
Further, quick home buying companies will make competitive and speedy offers to purchase almost any age, condition, shape, size or type of property, regardless of whether the economy is currently in a recession or not. This can make them a good choice when trying to sell when there is an economic downturn.
Selling this way also avoids the need to create and advertise a listing for your home, which would describe the property and include photographs of the interior and exterior. Marketing a listing can be a very expensive and time-consuming process with at best mixed results.
Contacting a fast buyer also means that you can avoid having to endure many viewings, where people who are interested in purchasing your house or flat get to tour it before considering whether to make an offer. If you sell to a fast buyer, they will have one of their experts visit the property to assess it before making a final offer, but you won’t need to have several viewings. If you are looking to sell discreetly we can help too and you won’t need to worry about the neighbours knowing.
This can also be a good choice for selling if your property has any physical flaws or other attributes that some private buyers might see as problems that cause them to lose interest in the home. During a recession, some people could be even more opposed than usual of purchasing such houses or flats, but quick buyers will never look at homes in this way.
LDN Properties, for example, has a long and varied list of purchases that it’s made or considering making since launching in 2003, including vandalised homes, property without a FENSA certificate, properties with subsidence, flats with cladding, houses built from concrete or other non-typical construction material, homes that have unregistered titles, flats with damp problems, fire-damaged properties, and other situations.
Selling on your own
Another way to sell your property during a recession is doing it solo, which gives you the duty of preparing and advertising the listing, scheduling and hosting viewings, and hearing offers from potential buyers. This requires a commitment of time, effort and money, and it can be stressful – you will have to monitor the sale every day, even during your normal work hours.
That’s why this type of selling is only suggested for those owners that have successfully sold a home in the past, or have a family member or friend with such experience who can help. Even with such knowledge, it can take more than a year to find a buyer when selling this way.
Perhaps the obvious pro of selling on your own is not having to pay an estate agent or auctioneer any commission for finding a buyer, so you get to keep the full proceeds. However, you can get this exact same result, but with none of the stress of selling on your own, when you sell your home to a fast property buyer because they will never charge you any commission.
Selling through an estate agent
You won’t have to do much work when selling via an estate agent, because they will handle the effort of preparing a listing for your home, advertising it in their office, online and in local newspapers, scheduling and hosting viewings, and fielding genuine offers from buyers.
But they will want to be paid for this work, and they earn their money by charging sellers commission. This fee is subtracted from the sale proceeds immediately after exchange of contracts, which means that you’ll have to settle for a reduced net profit.
Some estate agents might charge an even higher rate of commission, and others could be willing to negotiate a lower fee, so you should ask them if this is possible.
Another negative aspect of selling this way is that it can take quite a long time, and you should be prepared for your home to remain unsold for many months or even more than a full year. That’s not ideal for those owners whose top goal when selling is doing so as fast as feasible.
Selling at an auction
Alternatively, you could try to sell your home at an auction, where people will place bids of ever-increasing value for how much they want to buy your home. The aim is to have many people wanting to buy the property, pushing the final price as high as possible.
However, you might not receive any bids on your house or flat, which means that it does not sell, and you will have to begin again with trying to find a buyer for the property, adding further delay to the selling process. Or you may only get a single bid at the reserve price, which is the cheapest value at which you are willing to sell your property.
One factor to consider in trying to calculate your potential auction profit is knowing how much you’ll have to pay the auctioneer in fees. Some auctioneers may be willing to lower their fees or having the winning high bidder pay some of the costs, so always inquire about this possibility.
This is not the speediest choice for selling a home, because the entire process – if you successfully find a buyer for the property – will take at least a number of months. There’s an initial wait of many weeks or longer between the date on which you enter your flat or house into an auction and when the auction actually happens. And if the home sells, the winning top bidder typically has an average of 28 days to complete all of their required steps to finalise the sale.
Some auctioneers might give successful buyers even more time to finish their mandatory tasks for purchasing your home, whereas other auction houses could be willing to set a tighter deadline. Ask specific companies about their policies and any flexibility on this timing issue.
Top queries and answers about selling a house during a recession
Homeowners considering selling their property sometimes have questions for us, ranging from how long the sale will take through to selling a property when works are needed. Here are some of the main questions and answers we receive about selling during a recession:
Your top questions when selling property during a recession
A recession occurs when the UK economy suffers a downturn, often with job losses, inflation, and other negative impacts. This in turn can reduce demand for buying properties, because people have less disposable income and may be more concerned about making such a large investment. Therefore, it can sometimes be harder to sell a house or flat during a recession.
As described in the previous answer, reduced interest from potential buyers is a major concern. But another negative factor is the fact that buyers might not be willing to pay as much money for properties, and will seek to offer you far less than your home’s current asking price. Your goal should always be to avoid selling your property at a loss or only just breaking even.
Even though there are several disadvantages of attempting to sell a flat or house during a recession, you might also find some potential benefits. For example, there are sometimes more people interested in buying properties because they think that they will be able to get a home at a lower price. It also means the offers you get from buyers are likely also more serious.
Yes, and some of these steps will not require that you spend much time, money or effort. Simply tidying up the home to make it more presentable – including mowing the lawn, repairing any broken roof tiles and making rooms appear less cluttered – can have the effect of making buyers think your property is more valuable, and therefore worth a higher asking price.
Capital Gains Tax is a charge usually levied on the total profit that you might make from the sale of your home. It usually only applies to the profit that you earn, and not the greater price at which the property sells. During a recession, you might have to accept a lower sale price for your house or flat, which would reduce your overall profit, and in turn possibly lower or eliminate your tax liability.
The speed at which you might sell your home amid a recession will depend on the method that you choose for finding a buyer. Using an auctioneer will often take at least a few months, whilst selling on your own or through an estate agent may take over a year. The fastest option is a quick home buyer, as they can purchase your property within just a handful of weeks.
You can avoid paying any fees when selling your flat or house if you sell on your own, or if you use a fast buyer such as LDN Properties. However, when you sell via an estate agent or auction house, you will have to pay them commission.
