Super-prime and the rise of ‘try before you buy’
In a buyer’s market for properties, some sellers are allowing potential buyers to move in temporarily before they sign on the dotted line. Cosy sleepover — or bed of thorns?
Imagine the scenario: you’re selling your house and it’s taking some time. Eventually, a purchaser comes into view, but first they want to thoroughly check your property’s suitability. And to do so they want to move in, temporarily. Maybe for a night or two, maybe for a longer-term rental. What would you say?
It seems that more people might say yes. The concept of “try before you buy” is growing in popularity among buyers and sellers, especially at the very highest price points, says Becky Fatemi, executive partner at Sotheby’s International Realty in London. It makes sense, she says. “We have the opportunity to try on clothes before we buy them so why shouldn’t we be able to try out homes?”
“In the past 13 months, four of my super-prime tenants — two in Mayfair, one in Kensington and one in Knightsbridge — have gone on to purchase the properties they were renting, two priced over £20mn and one over £50mn,” says Tom Smith, head of super-prime lettings at Knight Frank. “That was not something I had seen at all in the previous 12 months.”
The concept is one Fatemi has been testing the water with since 2017. Mansion House in Westminster, the remodelled former Liberal Democrats headquarters, had been listed for sale at £36mn, she recalls. When the property was still unsold in 2018, she arranged a one-year £1mn rental. The contract included the option to buy at an agreed price when the lease expired.
“Since that rental, I have negotiated into contracts, where possible, the option for tenants to purchase,” says Fatemi. “Today, high purchasing costs make it cheaper to rent [at the top end of the market] and with buyers in the driving seat, asking prices are not being achieved.” For those properties that have been on the market for more than a year and have not reduced their asking price, “offers are sometimes coming in up to 25 to 30 per cent below,” says Fatemi. When prices have been reduced, following Fatemi and her team’s advice, offers can still be around 5 per cent under asking, she says.
For sellers in this situation, renting is being considered as an option. “As long as the sellers trust that the agent has truly checked that the client has a serious intention to purchase, it can make sense,” says Fatemi. “In some situations the buyer will get comfortable, they’ll understand the benefits of living in the property and not want the hassle and associated costs of moving elsewhere.”
In 2018, Mansion House in Westminster was rented with the option to buy at an agreed price when the lease expired
Not everyone is in agreement. Mark Lawson, partner at The Buying Solution, says that “try before you buy” is “an excellent idea for a prospective buyer but requires a leap of faith for vendors.” He adds: “The buyer gets to live in the house, see how it works, listen to any noises and learn about the area and the neighbours. It gives them excellent insight — while they check out all the negatives. The only upside for the seller, however, is that if the buyer likes it, they tend to commit fully to the purchase.”
Most buyers wisely check out an area before committing to a purchase, consulting easily accessible information — from crime figures to internet speed. Far fewer consider checking out — by checking into — a specific property. Knight Frank data shows that 23 per cent of UK buyers in 2024 bought a property after only one visit, a figure that rose to 52 per cent in Edinburgh.
“Try before you buy is not a new concept but it has become more structured and visible in recent years, particularly in the super-prime market,” says Knight Frank’s Smith. There are multiple reasons for the sleepover preview to be gaining ground. “In light of market volatilities, tax changes and associated costs with purchasing, more international buyers are opting to rent first before committing to a purchase,” says Smith. Knight Frank’s data for London shows that the number of tenancies agreed from £1,000 per week was 16 per cent higher in the first quarter of this year compared to the same period last year. “However, I’d still say [renting with a view to purchase] remains a niche strategy rather than a widespread market trend.”
“Around 10-15 per cent of our London tenants engage in discussions, request an option to purchase, or seek first refusal,” he continues. He cites a client who paid for a three-year Hampstead rental upfront, negotiating fixed sale options for each year of the tenancy. But most renters are not looking to buy. “Based on our data, no more than 5 per cent of [total] rental deals in the super-prime market in London lead to a purchase,” he says.
There’s certainly plenty of red tape to consider, even for just a short one- or two-night stay: drawing up contracts, covering insurance and setting house rules to start with. “For some sellers, the risks outweigh the potential benefit,” says Laura Conduit, a partner at law firm Farrer & Co. “I had a former client who went into occupation under a contractual agreement between exchange and completion and then failed to complete and refused to move out, causing a major headache for the seller. It’s perfectly possible to draft for such an eventuality but enforcing legal agreements doesn’t come cheap and takes time.”
It’s a risk increasing numbers of those with a home to sell are willing to take, though. “In a market where buyers are scarce, we find sellers are much more willing to consider such arrangements,” she says.
There’s also a high chance it comes to nothing. “One client of mine stayed for the weekend in a house that was for sale at around £6mn on the south coast with a view to purchasing,” Lawson says. “He asked if his family and friends could stay. For his part, the owner stipulated that the property should be professionally cleaned afterwards.”
The final decision? No sale. “The client felt it was too small when they were there,” says Lawson. “They were genuine potential purchasers. If the vendor allows a stay it is hard to avoid but vetting is key.” Among his “try before you buy” clients in the UK, “based on my experience, there’s a 40 per cent chance of a sale completing after a brief stay”. One recent success story was the sale of a farmhouse in Oxfordshire; in this case, the buyer “had put in an offer, which had been accepted, and they asked to stay for a weekend when the vendor was away”, he says. “It spurred them on to exchange as quickly as they could.”
There are two main routes to set a rental-to-buy option in motion, says Smith, both with pros and cons. The “fixed price option” involves a pre-agreed purchase price being written into the rental agreement. The “price fixed at trigger point option” gives the tenant exclusive rights to buy but with a price based on a market guide at the time they decide to proceed.
Costa Navarino in Greece, where rental villas can be bought, with any rent paid deducted from the price
“The second option is more common, giving both parties flexibility while securing the tenant first refusal,” says Smith. “Fixing the price upfront offers certainty for both parties but may leave one side disadvantaged should market conditions change. The second option gives flexibility but adds uncertainty. Buyers risk the price increasing, sellers risk the tenant walking away.”
Scott Sachs from Washington DC-based The Synergy Group has organised longer-term rentals specifically aimed at an eventual purchase, generally with no agreed sales price written into the rental contract. The “lease to own” concept is, he says, becoming more of a reality as sellers realise their prices are trailing market conditions.
“Traditionally, renting-to-buy involves paying a higher rent with a small proportion going towards the down payment or closing costs,” he says. “The complication arises at the end of the lease agreement, getting both parties to agree to a fair market price. We’ve made it happen, but it takes creative thinking.”
He is currently working with a client to secure a rental in a high-end building in Washington; the property is for sale and the owner has agreed to a six-month lease. “Sixty days prior to expiration, the client can exercise the option to purchase and we are securing a price in the initial contract that insulates the seller and encourages this type of arrangement,” says Sachs.
The resort and branded residences markets, with several similar properties available for rental and often an established rental programme in place, lend themselves particularly well to the try before buying model. At Costa Navarino, a sport and leisure resort on the Greek Peloponnese, rent paid on a stay in the Villa Rental Collection — nightly prices average €2,508 — will be deducted from an eventual property purchase.
At the Koh Samui resort of Samujana a pre-purchase stay is encouraged © Nicolas Voisin
To date, every villa owner there previously stayed at the resort, either at one of the four hotels or in a rental property, says senior commercial director Lefteris Tassoulas. One such is Michael Wilkinson, general manager of engineering firm Bechtel, who is based in the Chilterns. “I was actively looking to buy a family villa in Greece, somewhere we had visited for holidays for several years,” he says. “From our previous stays at Costa Navarino we knew we wanted a house close to both the beach and the golf course and waited for the right opportunity to come up. It was relatively easy to make the decision because we knew the resort so well.”
At Samujana, a villa resort on the Thai island of Koh Samui, a pre-purchase stay is positively encouraged, with all rental costs deducted from the sales price. “I would say approximately half of all villa sales have been secured on the back of eventual buyers having rented beforehand,” says John Kinder, chair of the villa owners’ committee.
Back at Westminster’s Mansion House, Fatemi’s original try before you buy property, the tenants chose not to go ahead and purchase. The property did, however, change hands and now is once again back on the market, with the original £36mn price tag reduced to £21mn. Time for a sleepover?
