Can I not get a mortgage on a currently tenanted property?

recipesforme

Hi,

HWe went to view a house last week and my husband rang to make a few enquiries at the
<snip> office a few days later.
We were told there were tenant in situ (whose tenency was due to end upon completion of the house sale). This fact excluded us from bidding on the house as first time buyers and that the bank would never approve a mortgage on a house that was currently tenanted.
This is the first time we've heard this - is it true? Can tenented properties only go to cash buyers?

Thanks!

godtabh

A bank wont give you a mortgage with a tenant insitu

Michael D Not Higgins

Banks will not allow drawdown of a mortgage without vacant possession. "Tenancy due to end upon completion of the house sale" means nothing. It sounds like they wanted to keep getting rent while the house was being sold but that doesn't guarantee the tenants would vacate at house sale time. You can push them for more info, like are they leaving at sale agreed time or have they been served notice yet but honestly you're better off walking on this one.

recipesforme

Thanks for the answers.

It's not the first time we've bid on a house that was tenanted but the first time we've been told this. The dark and secretive world of real estate eh?! Well at least we've learned a little something.

Michael D Not Higgins

recipesforme wrote: »

Thanks for the answers.

It's not the first time we've bid on a house that was tenanted but the first time we've been told this. The dark and secretive world of real estate eh?! Well at least we've learned a little something.

The fact that they prevented you from bidding is a massive red flag. I reckon they don't think they can get vacant possession and are hoping it will become the cash buyer's issue.

Keep in mind if the tenant has been there a long time, they have a long notice period to serve also. It goes all the way up to 32 weeks for someone renting over 8 years. By all means feel free to bid a property that has tenants but be prepared to walk at the first delay because it can continue for years if the tenant digs their heels in.

Paddytheman

Sorry can someone just clarify for me as Ive viewed about a dozen houses and at least half of them were not owner occupied but this was never mentioned, so a house cant be sold when theres someone leasing it? Or do the tenants have to move out before the mortgage can be drawn down thus causing it to be unoccupied for a period of weeks/months before the process can be finalised.

I ask particularily as we are in the process of getting quotes for work, even paying a builder to visit a house with us which has tenants and the current EA is totally aware that we are not cash buyers.

Graham

Banks will require vacant possession (i.e. tenants are out) before allowing drawdown of the mortgage. I don't think they will care how long the tenants have been gone, just that they are gone.

You would expect the current owners to give notice to the existing tenants but it's worth pointing out notice periods can be fairly long under current legislation and if a tenant refuses to budge at the end of the notice period, you could be in for a very long wait.

Cathmandooo

Paddytheman wrote: »

Sorry can someone just clarify for me as Ive viewed about a dozen houses and at least half of them were not owner occupied but this was never mentioned, so a house cant be sold when theres someone leasing it? Or do the tenants have to move out before the mortgage can be drawn down thus causing it to be unoccupied for a period of weeks/months before the process can be finalised.

I ask particularily as we are in the process of getting quotes for work, even paying a builder to visit a house with us which has tenants and the current EA is totally aware that we are not cash buyers.

A house can be sold with a sitting tenant. The issue is between the buyer and the bank and getting a mortgage. Banks won't give a mortgage for a house with a sitting tenant. A sitting tenant turns the house into an investment, a business, no matter what lease is in place or what promises have been made of a vacancy date, the bank won't entertain it until the tenant has moved out.

The EA is hired by the owner to get the best price for the house. If the EA turned away every person relying on a mortgage to purchase the house the house price would plummet and would be unlikely to sell (owner would be unlikely to accept low offers). The EA allows mortgage people to bid to get the cash buyers to increase their bids. In that case if the cash buyer bids hit a level the owner is happy with the EA will recommend going with that bid even if mortgage holder bids are higher. In the meantime the EA is hoping the tenants move out so that the mortgage holders have a chance to have their bids accepted. It's a mess when a sitting tenant is involved sadly.

Laghan

I was a first time buyer and went sale agreed on a house that had a tenant in it at the time. Once contracts were signed, the tenant got 30 days notice (in my case the tenant was there for less than 12 months). The bank didn't have an issue with it, but the mortgage couldn't be drawn down until the tenant had left.
In my case, the tenant had moved out before the 30 days and it all went really quickly.

newacc2015

Michael D Not Higgins wrote: »

The fact that they prevented you from bidding is a massive red flag. I reckon they don't think they can get vacant possession and are hoping it will become the cash buyer's issue.

Keep in mind if the tenant has been there a long time, they have a long notice period to serve also. It goes all the way up to 32 weeks for someone renting over 8 years. By all means feel free to bid a property that has tenants but be prepared to walk at the first delay because it can continue for years if the tenant digs their heels in.

It also depends on how long the tenant is there. There surprisingly a lot of tenants in areas with pre-63s where the tenants have special rights ie they cant be evicted normally and have a form of rent control. I used to go to a hardware where one of the staff had these special rights and said a good few tenants in the houses around here had them too.

IMO I think it is very dodgy when a house isnt sold as vacant possession. If you know a buyer cant get a mortgage you are limiting yourself to about 40% of buyers (cash buyers only make up around 40% of the market). I cant see a logically reason why a seller wouldnt evict their tenants to get a higher sale price other than they know the tenant might be reluctant to leave

the_syco

recipesforme wrote: »

We were told there were tenant in situ (whose tenency was due to end upon completion of the house sale).

Run a fcuking mile! This means that they can't get them out, and it'll be your problem by the time you realise this!