Selling in current climate

kueitka

Hi all,

I have a question in relation to hypothetical scenario. The answer is probably staring me in the face, but due to my lack of knowledge i can't see it...

So, the housing market is lacking movement because there are few first time buyers as it is difficult to get a deposit and a mortgage, and people are reluctant to 'lose' money on their proprerty by selling less. So it's stagnant (I am aware this analysis is crude).

So, what is stopping second-steppers (and anyone else in a chain) offering to effectively 'pay' for someone else's deposit (say 10%). So in effect they would be geting on the ladder for 'free' and the second stepper wouldn't be losing any money on the value of my home (i.e. selling for less than the home report value).

Is there a legal (or other) impediment to this?

Now, i realise there will be the people who say 'your home is only worth what someone is willing to pay for it', but given the aforementioned stagnation in the market, i think this scenario could work. So, for example, if there were four people in the chain (excluding the FTB), clubbing in 2.5k for a 10k deposit for the first time buyer, everyone gets to sell, without 'losing out' in a cut-throat market.

Like i said, please excuse my ignorance if this is dumb

:idea::question:

JingleJangle

It depends where you live. Property market is pretty bouyant in London and parts of the South East.

kueitka

Glasgow area. FTB market is rubbish.

kueitka

Bump. Is this idea rubbish?

googler

I'm no mortgage advisor, but won't the second-sellers need every penny of their savings to muster a deposit for their onward move?

If you're selling at £125k, say, and you want to buy at £175k, assuming you have 100% mortgage on your £125k - won't you need around £12.5k (25% of your additional borrowing) as a deposit for the move? If you're contributing £2.5k to an unknown FTB, you'll need £15k in ready cash. That's before you take into account agent's fees, etc.

dippy

kueitka, what you're describing is "vendor gifted deposit" and not all mortgage lenders accept that.

It's a common tool that the housebuilders use to try to keep their overpriced rabbit-hutches still overpriced but mortgage lenders are usually wise to that. That is, they're providing a mortgage based on Loan-To-Value ratio and are wise to people trying to at best "circumvent" the system.

A market actually functions where buyers and sellers meet. There is no tool that sellers can actually use to enforce artificially high prices. Activity will happen at the margins, e.g. forced sellers who have to sell because of divorce, death, downsizing, etc.

twirlypinky

JingleJangle wrote: »

It depends where you live. Property market is pretty bouyant in London and parts of the South East.

I wish it was bouyant in this part of the south east.

twirlypinky

I don't see how people can afford to finance a FTB's deposit, when they can't afford to sell at a loss.

sonastin

Even mortgage lenders who consider vendor gifted deposits require the buyer to be putting down some degree of deposit themselves. You can't ever sell to those who aren't in a position to save.

The lenders will take the gift into account in their valuation when it comes to assessing their risk in the property. You couldn't just "add" 10% to the asking price and then "gift" that 10% back to the buyer. The price agreed has to be a fair market price for the property with or without the discount or the buyer won't be able to secure enough mortgage to pay for it.

It is easier all round if the 10% you are proposing to give to buyers comes straight off the asking price. That way, your property is more attractive to everyone, it is easier for FTB to save 10% of the lower price themselves and you're not fudging the system in any way shape or form.

girllikeme1

Some vendors offer to pay the stamp duty which is another method of helping the buyer as they can then put that money towards their deposit rather than spending out on stamp.

Caveat_Mortgagor

kueitka wrote: »

Hi all,


So, the housing market is lacking movement because there are few first time buyers as it is difficult to get a deposit and a mortgage, and people are reluctant to 'lose' money on their proprerty by selling less. So it's stagnant (I am aware this analysis is crude).

Price is a huge issue and one you have missed completely. You need to consider 2 elements of the cost of housing.

1. FTB's arent buying because prices are too high

2. They arent buying because prices are falling.

If you are looking for answer, you need to understand the problems. 2 more there for you to think about.