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Vendors Pay Stamp Duty
maddjake
Posts: 1 Newbie
Can anyone please provide advice on the following issue:
We originally agreed a purchase price of £295,000 for a property, which was originally on the market for £319,950. This offer was accepted by the vendor via the Estate Agent. In order to provide funding for improvements that we wish to make, we increased our offer in agreement directly with the vendor to £305,000 on condition that they pick up the Stamp Duty costs.
In our view this meant that the increased purchase price would cover all additional costs that the vendor would incurr. The mortgage lender has no issue with this as long as the valuation report meets the purchase price of £305k.
However, the vendors solicitor in contrast to our own solicitor, claims this is a fraudulant transaction.
Can someone please provide advice on how best to proceed?
We originally agreed a purchase price of £295,000 for a property, which was originally on the market for £319,950. This offer was accepted by the vendor via the Estate Agent. In order to provide funding for improvements that we wish to make, we increased our offer in agreement directly with the vendor to £305,000 on condition that they pick up the Stamp Duty costs.
In our view this meant that the increased purchase price would cover all additional costs that the vendor would incurr. The mortgage lender has no issue with this as long as the valuation report meets the purchase price of £305k.
However, the vendors solicitor in contrast to our own solicitor, claims this is a fraudulant transaction.
Can someone please provide advice on how best to proceed?
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Comments
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How do you know the mortgage lender has no issue with it? Who exactly told you that, was it the lender or the broker/advisor?
I hope someone more qualified in this area can clear this up for you. But to me, if i was lending someone money to buy a house, i would want to know i could get that money back if it was sold - where as you are actually using a portion of that money for fees. I'm sure it goes on all the time but technically it probably is classed as fraud.0 -
Your lender needs to be told about the proposed arrangement, otherwise, as suggested, it is fraud. If, as is usual, your solicitors are also going to be acting for your lender, then they must either tell the lender about the proposed arrangement (which is effectively a price reduction of £9,150 so the "real" price is £295,850) or cease to act both for you and for the lender. Effectively you have no choice but to allow your solicitor to reveal this to the lender.
Now that's OK if the lender has been properly informed by whoever is arranging the mortgage. Sometimes lenders will agree "allowances" when they won't agree "price reductions" which are really the same thing. That's not logical. However, if with full information they are happy, that is down to them.
Unfortunately what sometimes happens is the broker arranging the mortgage tries to be clever and dresses the thing up in a way that doesn't really make it clear to the lender and when the solicitor explains it more clearly the lender changes its mind.
I am assuming that if you need the higher purchase price then you are going for a highish LTV ratio loan. If I were a lender I would be very iffy about agreeing this, but you never know. Please make sure that you actually see the mortgage application that is submitted and make sure that it makes clear that the price is £305,000 but the seller is paying the 3% SDLT.
(In practice of course, he won't "pay" the SDLT - your solicitors will simply send that much less on completion and they will "pay" it.)RICHARD WEBSTER
As a retired conveyancing solicitor I believe the information given in the post to be useful assuming any properties concerned are in England/Wales but I accept no liability for it.0 -
If your solicitor is happy with it and he is also acting for the lender, why should you rock the boat?
We pay solicitors to do the legal work and accept their advice for which they are liable.
If (only if) a fraud is being committed, your solicitor will have spotted it and advised accordingly. As he is aware of what is happening and is happy with it, I don't see why there is a problem.
I don't get why your vendor's solicitor needs to get involved in your legal work.I'm a Forum Ambassador on the housing, mortgages & student money saving boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Forum Ambassadors are not moderators and don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com (it's not part of my role to deal with this). Any views are mine and not the official line of MoneySavingExpert.com.0 -
I don't get why your vendor's solicitor needs to get involved in your legal work.
He would potentially be a party to fraud but all he needs is your solcitor's confirmation that the lender knows about the proposed arrangement and is happy to proceed.RICHARD WEBSTER
As a retired conveyancing solicitor I believe the information given in the post to be useful assuming any properties concerned are in England/Wales but I accept no liability for it.0
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