... So, is this illegal?

Alex_the_worm_king

I don't know if i've explained this properly and you lot have got the wrong idea, or whether you are all indeed right.

The house has been valuated at 120k, the seller is willing to sell for 110k, and also pay the deposit, which means we would need a mortgage for 105k. How does the bank lose out?

In my mind the seller is the only one losing out as they are selling the property for less than it's worth. It's a favour between the seller and me. It's not like I am trying to get a mortgage for more than the house is worth?

JQ.

Everyone understands exactly what you are saying and it is MORTGAGE FRAUD. You are deceiving the mortgage company as to your finances and you will have to lie on your mortgage application. If a solicitor permitted to you to do this they would be complicit in the fraud.

beecher2

Alex_the_worm_king wrote: »

I don't know if i've explained this properly and you lot have got the wrong idea, or whether you are all indeed right.

The house has been valuated at 120k, the seller is willing to sell for 110k, and also pay the deposit, which means we would need a mortgage for 105k. How does the bank lose out?

In my mind the seller is the only one losing out as they are selling the property for less than it's worth. It's a favour between the seller and me. It's not like I am trying to get a mortgage for more than the house is worth?

If you buy at 110 then you need a deposit of 11k - is the seller giving you this 11k in cash? You won't get a mortgage of 105k on a house selling for 110k - maximum would be 99k.

dunstonh

The house has been valuated at 120k, the seller is willing to sell for 110k, and also pay the deposit, which means we would need a mortgage for 105k. How does the bank lose out?

If you tell the bank its a gifted deposit and the money actually exists then there is no problem (Although some lenders dont like it from a lending criteria point of view as someone who has saved generally is considered to have better character and discipline than someone that hasnt - thats how it used to be before the credit boom and it heading back that way slowly). However, artificially manipulating the house price is fraud.

dollydiva

I suggest you explain this all to your chosen solicitor...see how that goes down...:rotfl:

Sunshine12

Of course they want a quick sale! Who wouldnt!! Your LTV would be based on the price paid by you, not the Home Report/survey valuation. Im confused as to how you are getting a mortgage of £105k on a property you are potentially paying £110k for (or have lenders LTV's eased up since yesterday??)

Alex_the_worm_king wrote: »

Is it not just like new build properties where the developer offers 5% deposit paid/match? This way money is knocked off the price of the house to go towards deposit. Not all banks will accept this but it is legal, obviously. This seems like a similar situation except the developer is a friend.

In the case of new build properties any incentives (including deposit paid etc) have to be stated on a CML disclosure form which the surveyor ultimately takes into consideration when valuing to ensure the mortgage provider doesnt lend on anything but the purchase price net of any financial incentives.

mostlycheerful

“the solicitors will sort out the paperwork and just say the 10% deposit has already been paid.”

Pardon? “just say”? Yer wot? What on the phone? Or in writing? Yeah, likely. I don’t think so, matey!

What, with no ten grand actually on the table and no paperwork to show where it’s come from? Or going to. Thereby risking a thorough nicking if it comes to the attention of PC Plod and Inspector Knacker. Golly, you learn something new every day. Yes, I know that a lot of people and supposed professionals such as solicitors are bent and on the rob but, er, just blatantly blagging it like that with nothing to back it up? Wow. Yes, it’s really slack in crime-pays-UK if you can just rip it off like that and no one cares or notices. Well I never.

But, hang on, nah, I don’t believe this. This notion is so full of holes I think you’re either misguided or having a larf. Or if these people really are doing this then they’re just loonies. And riding for a fall.

Or do they front ten grand of their own cash? Yes, this is activating the old brain cells as to how this apparent scam might work in practise. In which case where do they put it and how do they assert that they’re giving it to you. And then what. How do they get their ten grand back? What, just put it into an escrow account and then take it out again. Hmm, maybe that would work. Or would it. Yes, conceivably it’s all just a legal wheeze and this is what clever people in the know do from time to time. Maybe. Who knows.

So are the mortgage providers just thick, or don’t care, or it just doesn’t matter cos they never find out and they accept anything a solicitor “just say”?

Or is it just lying, pure and simple, and not even a ten grand being shuffled to and fro to back it up if it comes on top, which it never does cos it’s in everyone’s interests to let it happen so even if it does come to light or is known then it’s in everyone’s interests to keep mum and just get on with business as usual. And they all collude together in the crime. Maybe.

Amazing if this is the case. Are you sure you’ve got this right, it just doesn’t seem likely that solicitors would put themselves at risk of getting busted in this manner, if it is nickable, which on the face of it would appear to be the case as surely this is fraud, pure and simple.

Yes, why would a solicitor do this, unless perhaps it is legal and just a wheeze that some people do. What for? What, just to facilitate a little house sale and get their fee? Um, no, if it’s illegal then that doesn’t sound likely, not at all. Surely a solicitor who’s short of sufficient house sales to make their fees would do some other legal work or some bog cleaning or flipping burgers rather than resort to petty crime and risk losing their whole livelihood and maybe even getting banged up.

So maybe it’s legal. Or is there something missing in this story? Yes, quite mysterious. On the face of it your story doesn’t add up, does it. I’d be interested to hear some more about this if there is any light that you or anyone else can shed on it.

Yes, that’s an odd one, you don’t get many of them to the pound here at MSE.

silvercar

dunstonh wrote: »

If you tell the bank its a gifted deposit and the money actually exists then there is no problem (Although some lenders dont like it from a lending criteria point of view as someone who has saved generally is considered to have better character and discipline than someone that hasnt - thats how it used to be before the credit boom and it heading back that way slowly). However, artificially manipulating the house price is fraud.

I agree. Provided you tell the mortgage lender that the deposit is gifted from the vendor then you are not fraudulently applying for money. It relies on the lender accepting vendor gifted deposits and the valuation stacking up to the higher figure.

A lot of lenders won't accept vendor gifted deposits as if the property was really worth more then the vendor would have sold it for more. The only time when it is truly genuine is when the buyer and seller are connected eg if you buy granny's house worth 200k for 150k because granny wants to give you a helping hand onto the property ladder.

antrobus

Alex_the_worm_king wrote: »

I don't know if i've explained this properly and you lot have got the wrong idea, or whether you are all indeed right.

The house has been valuated at 120k, the seller is willing to sell for 110k, and also pay the deposit, which means we would need a mortgage for 105k. How does the bank lose out?

In my mind the seller is the only one losing out as they are selling the property for less than it's worth. It's a favour between the seller and me. It's not like I am trying to get a mortgage for more than the house is worth?

Not really. Your original post stated;

Alex_the_worm_king wrote: »

The friend selling the house has said to get a mortgage for 100k and the solicitors will sort out the paperwork and just say the 10% deposit has already been paid.

To "just say" that a deposit has been paid would indeed be "deceiving".

P.S. As previous posters have stated, the house in question is only worth what someone will pay for it. If seller is willing to accept £105k for the house, then it's very likely to be worth £105k.

getmore4less

antrobus wrote: »

P.S. As previous posters have stated, the house in question is only worth what someone will pay for it. If seller is willing to accept £105k for the house, then it's very likely to be worth £105k.

Or more likely less, get independant offers on the table first then offer a bit more.