Studio flats can pose a challenge in selling, particularly in a sluggish market. The issue of some studio flats not being eligible for mortgage lending can further complicate the selling process.
While studio flats are seen as low-cost for heating in winter, you will need a fold-up bed to create space.
To learn more about your options for selling your studio flat to a cash buyer, continue reading.
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Why Studio Flats Appeal to Cash Buyers Only?
Around half of mortgage lenders do not provide loans for studio flats. The lenders usually require a minimum size of 40 square meters.
Studio flats must also have separate facilities for food preparation, toilets, and washing.
The market for micro-homes is growing, especially in city centre locations with limited housing availability. This change in demand has led mortgage companies to review their lending criteria.
However, they still have limitations and prefer modern purpose-built studio flats that are small but well-designed rather than older-style studio conversions.
Most mainstream mortgage lenders still reject lending for studio flats, making selling them difficult.
Difficulties In Selling a Studio Flat
The main reason why studio flats can be difficult to sell is because mortgage companies consider them to be a risky asset. Mortgage lenders’ primary concern is ensuring they get their money back.
If the borrower cannot make payments, the lender must repossess the asset and sell it themselves. So, why are mortgage companies so concerned about the saleability of studio flats? There are two reasons:
Sub-prime Property Asset Class
Studio flats are suitable for short-term accommodation for a single person.
Living in a studio flat for more than a year is likely to feel cramped. Living and sleeping in a confined space is okay for a short time only. Living in a small area as a couple can be even more difficult.
Studio flats do not make good long-term accommodation, so they are not a stable asset compared to larger flats and houses.
Lowest End Of The Property Market
One advantage of studio flats is their affordability. However, this can also be a problem.
In a booming property market, when prices are high, studio flats are quickly bought up because larger flats are unaffordable for many.
But in a slow housing market, buyers have more choices, and the price for one-bedroom flats becomes more affordable. As a result, buyers tend to skip over studio flats and opt for a longer-term purchase.
In a slow housing market, there is still a demand for studio flats, but pricing experiences exaggerated downward pressure.
Mortgage lenders also believe that buyers at the lower end of the market, with lower incomes, are more likely to default on their mortgage repayments.
Is It Hard To Sell a Studio Flat?
It can be hard to sell a studio flat because of mortgage lending.
Suppose a mortgage company is unwilling to provide a loan; in that case, you may have to find a cash house buyer, which means selling for a significantly lower amount than a mortgage buyer would pay – usually around 25% or less.
Is My Studio Flat Suitable For a Mortgage?
Studio flats are considered a non-mainstream property asset. The more “normal” a studio flat appears, the more likely a mortgage company will be willing to lend.
The size of the flat is the most important factor for mortgage lenders when deciding whether to lend or not. According to the Housing Act, a room with less than 10.2 square meters of floor space is unsuitable for two people to sleep in.
Purpose-built versus conversions
A purpose-built studio flat with “smart features,” such as built-in facilities and a mezzanine floor for added living space, enhances comfort for the occupant.
Mortgage lenders heavily rely on surveyor’s comments regarding “saleability” when deciding whether to provide a loan. The location of the property plays a role in this assessment.
The more upscale the location and the more luxurious the building, the less important the size of the property becomes to the lender. Studio flats above commercial premises and basement flats can also make it more challenging to secure lending.
If the owner of a studio flat needs to move, the ability to rent out the flat becomes an important consideration. Some leasehold properties have restrictions in the lease that prohibit renting.
However, the rental yield is often quite good for those that can be rented. This is because some local authorities pay the same rent for a studio flat as they do for a one-bedroom flat.
Selling a Studio Flat To a Mortgage-dependent Buyer
If your studio flat can be financed with a mortgage, ensuring you’re dealing with a genuine and reliable buyer is important. Accepting the first reasonable offer without verifying the buyer’s credentials can be a waste of time if the sale falls through.
Ensure that the buyer has their mortgage approved as soon as possible, not just their affordability checks but also the final decision from the mortgage company after the survey. Choosing a buyer with a substantial deposit will also increase their chances of obtaining a mortgage.
Selling a Studio Flat at an Auction
One option for selling your studio flat is through an auction.
You can consider auctioning your property, but be prepared to put in a low guide price to entice buyers. With auctions, there’s no guarantee of a sale because you might pick an auctioneer who can’t perform.
There are several non-refundable fees to be paid upfront, including:
- Auction entry fee – £500
- Preparing legal pack – £1,000
- Paying for searches – £300.
In theory, selling through an auction has the advantage of working with experienced auctioneers who have sold various types of properties, including studio apartments.
However, picking the wrong type of auction or poor-performing property auctioneer can be costly.
There are some additional risks to consider:
Description of Risk
Selling through an auction involves a significant amount of waiting. If you’re eager to sell your studio flat quickly, this may not be the best option, as it could take weeks or even months for the next auction to take place.
Additionally, even after the auction is complete, there is still a waiting period for the paperwork to be processed, which can take a month or more.
Another factor to consider is that auctioneers charge a commission to cover the costs of marketing and selling your flat.
This commission is charged regardless of whether completion takes place or not.
Estate agents handle all the responsibilities of selling your home in exchange for a commission. One major advantage of selling your studio flat through an estate agent is that they will do all the hard work for you, including creating and advertising a property on the Rightmove portal.
However, a downside of selling through an estate agent is that it can be time-consuming. You will need to schedule house viewings for potential buyers, which can be lengthy and inconvenient.
This means taking time off from work and ensuring any issues with the house are fixed. And even after a viewing, there’s no guarantee of finding a buyer, so you may have to repeat the process.
Another drawback of selling your studio apartment through an estate agent is that it can take months to find a buyer on the open market, especially since studio apartments are challenging to sell even in a good market.
Remember that on top of estate agency fees, you must pay legal fees and removal costs, which can eat away at your equity.
Another option for selling a studio flat is through a genuine cash buyer. Selling to a cash buyer ensures a guaranteed sale of your house. Unlike other buyers on the open market, cash buyers are not deterred by the challenges of selling a studio.
Another advantage of selling to a cash buyer is that you can secure a sale within a timeframe that suits you. If this sounds appealing, look no further because we are here to help!
At Property Saviour, we are cash buyers who purchase any house in any location and work on a timeframe that suits you. Plus, we cover all the fees, including the legal ones! We only require one quick viewing to ensure our cash offer is accurate.
As genuine cash buyers, you receive the full amount in your bank once you accept our offer. So, if you’re ready to sell your studio apartment, give us a call or fill in our callback form for a free, no-obligation cash offer that could be in your bank as soon as you choose.
Here’s why sellers trust us:
Property Saviour Price Promise
- The price we’ll offer is the price that you will receive with no hidden deductions.
- Be careful with ‘cash buyers’ who require a valuation needed for a mortgage or bridging loan.
- These valuations or surveys result in delays and price reductions later on.
- We are cash buyers. There are no surveys.
- We always provide proof of funds with every formal offer issued.
We'll Pay £1,500 Towards Your Legal Fees
- No long exclusivity agreement to sign because we are the buyers.
- You are welcome to use your own solicitor.
- If you don’t have one, we can ask our solicitors for recommendations.
- We share our solicitor’s details and issue a Memorandum of Sale.
Sell With Certainty & Speed
- Our approach is transparent and ethical, which is why sellers trust us.
- 100% Discretion guaranteed.
- If you have another buyer, you can put us in a contracts race to see who completes first.
- Complete in 10 days or at a timescale that works for you. You are in control.