Is this plan possible?

hsg123

Hello.....

I just have a few question... me and my partner are looking at buying a property but we are struggling for a deposit.

We have seen a house that we like that has recently been reduced from £170000 to £160000.

My first question is .... if we ask the vendor to put the price back up to £170000 and buy it for this price in the eyes of the mortgage company but actually agree with the vendor to buy it for £153000 and the vendor tells their solicitor we have paid the 10% deposit..... IS THIS LEGAL?

Would we officially have to declare to anybody that we hadn't paid the deposit?

I know this sounds really a really odd question but we just wondered if it would actually be possible to do?

kingstreet

No you can't.

When the property was being marketed for £170k you could have made an offer of "£170k with 5% deposit paid by vendor, leaving £161,500 to be paid." You'd then put 5% cash down as well and have a 90% mortgage of £153k on £170k.

Only Halifax will allow vendor gifted deposits on second-hand properties. More will allow it on newbuild stuff.

You have to ensure everyone, agent, vendor, both solicitors and your lender know you are doing this, otherwise it won't work. If the surveyor downvalues the property it will also more than likely put the purchase at risk as vendors ain't hot on losing a portion of their selling price, then giving up another 5% on top.

Going back to your original question, you cannot put the price back up once it's been reduced.

beecher2

I'm sure you know that this would be mortgage fraud - your lenders would be insane to agree to have anything to do with your plan. Keep saving for your deposit.

PaulLuke

Lots of problems with that plan but probably the word 'Fraud' would best sum it up!

CloudCuckooLand

Any deposit would have to pass between solicitors, due to anti-money laundering rules. Its not going to work. Even if it was not fraud. Which it is.

hsg123

I knew at heart it would probably never work but just wondered if there would be any loop holes with it.

I am very new to house buying and never knew the deposit had to pass through the solicitors.

So I think to sum up what you have all said .... I shouldn't do this as it would be illeagle.

beecher2

Well to sum up, you shouldn't do it, and you couldn't do it.

JQ.

kingstreet wrote: »

No you can't.

When the property was being marketed for £170k you could have made an offer of "£170k with 5% deposit paid by vendor, leaving £161,500 to be paid." You'd then put 5% cash down as well and have a 90% mortgage of £153k on £170k.

Only Halifax will allow vendor gifted deposits on second-hand properties. More will allow it on newbuild stuff.

You have to ensure everyone, agent, vendor, both solicitors and your lender know you are doing this, otherwise it won't work. If the surveyor downvalues the property it will also more than likely put the purchase at risk as vendors ain't hot on losing a portion of their selling price, then giving up another 5% on top.

Going back to your original question, you cannot put the price back up once it's been reduced.

Out of genuine interest, how often does the valuation come out at the agreed purchase price in these circumstances? Effectively the sale price is being artificially inflated by the structure of the deal, so the actual purchase price is £161,500, but the surveyor is being asked to value it at £170,000. I just struggle to see how the valuers support these deals, when all we hear about is downvaluations.

kingstreet

I don't know, JQ.

I haven't done one for years and despite it being mentioned on here several times, no-one has fedback the results of an attempted vendor gifted application.

There must be some properties out there being marketed at reasonable to low asking prices and I can only guess the gifted cases involve these, if they are actually making it to completion.