Have you inherited an old, ramshackle property left vacant for years? Or perhaps you’ve spotted a tumbledown cottage going cheap at auction.
Could a derelict building like this be turned into a successful investment opportunity? This blog will examine what’s involved in selling a derelict property in the UK.
What is a Derelict House?
A property is classified as derelict if it meets specific criteria the local council sets. These may include things like:
- Being vacant for an extended period
- Falling into a state of disrepair through neglect
- Being considered unsafe and uninhabitable in its current condition
- Having tax or mortgage arrears owed against it
Essentially, a derelict property has been left empty and allowed to deteriorate so that significant repairs are needed before anyone could live there again. They are often characterised by broken windows, crumbling walls, leaking roofs and overgrown gardens.
Derelict properties can vary from small cottages to larger houses and even former commercial buildings. What they have in common is that they have been left unattended for so long that the cost of fixing them up is substantial.
What Causes a House to Become Derelict?
There are a few typical scenarios that can lead to a property being abandoned and falling into dereliction:
The owner dies without heirs
If the owner of a home passes away and no next of kin can be traced, the property may sit vacant indefinitely. Without anyone responsible for its upkeep, it doesn’t take long for the elements to take their toll.
The owner goes into long-term care
Elderly homeowners entering residential care sometimes leave properties empty for years with no one to manage them. Companies may shut utilities off, and without heating or maintenance, the house falls victim to dampness, decay, and vandalism.
The owner suffers financial problems
Recession, job loss or debt can force homeowners to abandon a property if they can no longer afford repairs and the mortgage. These houses often then get repossessed. If you currently find yourself in this position, then click on the link to read about how to stop house repossession.
Structural issues make the property uninhabitable
Serious structural problems like subsidence or flooded foundations can make a building too costly and dangerous to repair. The owner may strip it of fixtures and fittings and then walk away.
Over time, the cumulative effects of abandonment and neglect take an immense toll on any building. The transformation of a family home into a decaying, ramshackle eyesore can happen faster than you might think.
Can You Sell a Derelict Property?
Strictly speaking, you can sell a derelict property in the UK. However, it’s unlikely to be as straightforward as putting it on the market and waiting for the bids to flood in.
Selling a property needing extensive renovation requires a particular type of buyer. And given the scale of work necessary, you would have to be prepared to sell at a sizeable discount compared to standard properties.
There are also some other key considerations:
You may need planning permission
Because derelict buildings often require significant structural changes, you usually need full planning permission before any work can commence. This means additional costs and delays for buyers.
It can be challenging to get a mortgage
The large scale of works combined with low valuation makes getting a mortgage extremely tricky for derelict properties. Most lenders shy away from them altogether. That restricts your market to cash buyers only.
The work costs could easily exceed the property value
It’s common for the renovations required on a derelict property to outweigh the actual property value by a lot. Any buyer will need very deep pockets to take on a project like that speculatively. They would be relying heavily on adding value through refurbishment.
On the plus side, because derelict buildings are inherently high risk, you have more room for negotiation on the listing price. For the right cash-rich buyer, this creates an opportunity to snap up a bargain. But they may still drive a hard bargain and expect a hefty discount to account for the costs and risks involved.
How Long Does It Take to Sell a Derelict Property?
Selling a habitable property in a reasonable condition would typically take around three months from listing to completion. But finding a buyer brings additional challenges. On average, you can expect the process to take:
- At least 3-6 months to prepare the property for sale. This includes clearing hazardous materials like asbestos, checking for protected species like bats and maximising curb appeal.
- 6-12 months of being on the market before securing an offer. This factors in time for buyers to cost up works, liaise with architects and put financing in place.
- A further 2-3 months to exchange, carry out surveys and complete the purchase.
So, you could be looking at anything from eleven months to almost two years to sell a derelict property.
The key here is being prepared for a lengthy sale process and having sufficient funds to cover:
- Maintaining adequate property insurance
- Securing, clearing and maintaining the site
- Paying your mortgage payments while empty
- Paying agent fees
With so many potential complications along the way, patience and deep pockets are an absolute must when selling derelict buildings.
Who Might Buy a Derelict Property?
Selling an uninhabitable, derelict property requires a very niche type of buyer. Here are a few of the potential purchasers to target:
The most likely buyers are property developers who specialise in taking on wrecked buildings to transform them completely. They have the construction know-how, teams of workers and access to finance needed for such heavy-duty projects. Most intend to extensively remodel derelict properties, maximise value, and sell them quickly.
Owner-occupier DIY renovators
Some brave owner-occupiers might fancy taking on a derelict place as the ultimate DIY challenge. They may eventually plan to live there, sell it or rent it out after completing renovations. Finding a buyer with sufficient time, skills, and spare capital can sometimes be tricky. And they will still expect a bargain price to account for the significant work involved.
Investors looking for demolition sites
In cases where the derelict property is beyond realistic repair, the land itself could still hold investment potential. Some buyers might purchase intent on demolishing the ruins to construct a new build home from scratch.
There is reasonable demand from overseas buyers looking for UK renovation projects in unique locations. For example, they may target derelict rural cottages designed to become idyllic holiday homes after refurbishment.
You might have heard stories of wealthy eccentrics buying dilapidated castles for a quirky passion project. While that’s rare, you may capture the attention of individuals looking for a unique renovation challenge.
Selling a derelict property
Selling a severely dilapidated, uninhabitable property is undoubtedly trickier than selling a straightforward family house in good condition. But you can do it successfully if you thoroughly prepare the building, work to make the project financially viable for buyers, market globally and above all else – be patient.
Finding a buyer who sees potential magic amidst the derelict property you want to sell may take up to a year. But for the right buyer willing to roll up their sleeves and take on a challenge, a derelict property can represent the ultimate transformational opportunity and a blank canvas on which to create their dream home.