Housing association / shared ownership and low valuation

mh8782

I'm looking to buy a two bed shared ownership flat. I've been offered the opportunity to buy 60% of the flat, with a full "market value" of £140k.

Having put down a £500 reservation fee, and applied for a mortgage, the valuation has come back at £130k, £10k less than the HA's estimate, but I have still been offered the mortgage. There are some problems with the survey (they didn't notice that the flat has gas central heating for example) but the £10k is still a significant difference.

I've thought about the pros and cons of shared ownership, and I didn't expect to make a great deal of money, but rather, I just didn't want to lose money, as well as making a home for the next few years.

I still think the flat is nice, and I don't want to pull out because of the wasted time and lost fees, etc but I'm worried. I've told the HA officer and they say I should challenge the valuation and seem to be dismissing it. I think that rather, they should be challenging it, and showing me how they got their figures, or if not, be willing to negotiate on price.

What is the best way to proceed?

theartfullodger

There are many threads here and elsewhere suggesting that shared ownership ain't as wonderful as the HAs say it is - problems selling when you want to move, can't sub-let etc etc etc.. and that the "Market Value"rarely seems to match what anyone else would pay..

The cynical (including me..) would think it's simply another way for HA to extract money from tenants...


Best regards, hope I'm wrong, hope you find what you want...

brit1234

I personally wouldn't go anywhere near shared ownership, I believe it a scam after deep research.

However if you have accepted the many negatives and are going ahead you should at least stick to the valuation and don't let the housing association over charge you £10k, they will be making enough from all the other charges.

They are worried that if you pay £10k less than their asking price then it will act as a bench mark for the rest of their properties.

I say fight them and get your lower valuation, after all this is a money saving website. However if you really want to save money avoid shared ownership at all cost.

bunnybunnyrabbit

Just out of interest, who was the mortgage offer from? I've heard this kind of thing happening with Santander lately.

They may be valuing the property on a different basis than the HA's valuer (who should be independent). The HA's valuer will give an "open-market" valuation whereas your lender may value it based on what they might get if it were to go to auction. They often see shared ownership properties as more likely to be repossessed with a likelihood they would have to dispose of it at a later date.

The HA is highly unlikely to budge on price so at the end of the day it's up to you whether you like the flat enough to proceed

mh8782

Thanks for the comments. With regards to the earlier comments, in an ideal world, I wouldn't be going down the shared ownership route, but I don't have the money to buy a house (which go for around £150k in my part of the world), or I'm left with house-sharing and with the threat of having to move all the time (and so, psychologically having a home is becoming important to me). There's a risk that all house prices are likely to fall, and I'd love them to (or I would before I went to buy), but I've been renting for years now and I'm still waiting for the drop.

As to BunnyBunny, thanks, it is with Santander and so that's interesting.

What I've done is that I contacted the HA's valuer (who at least works for an independent firm) and asked him to comment on the valuation from Santander and see where that leads. I'm going to at least make it clear to the HA that I am prepared to drop out if I don't get some reassurance that their valuation is reasonable, or that there is some room to move on price

brit1234

bunnybunnyrabbit wrote: »

They may be valuing the property on a different basis than the HA's valuer (who should be independent). The HA's valuer will give an "open-market" valuation whereas your lender may value it based on what they might get if it were to go to auction. They often see shared ownership properties as more likely to be repossessed with a likelihood they would have to dispose of it at a later date.

Just to set the matter straight the housing association is not independent, far from it. They have a vested interest on not only this sales property but all the other ones in the development. After they bought all the properties from the developer for £X, there will be a mark up.

Their valuation is not an open-market one. If it was the property would be able to sell at that price with out the shared ownership scheme. Have you ever wondered why the full 100% price is higher than the equivalent non scheme home?

Last week I had a phone call (as well as numerous texts and emails)from an housing association trying to sell me one of these shared ownership properties. I politely told them due to my research and friends experiences I wouldn't touch them with a barge pole. The housing association seemed to understand straight away and have been having a hard time selling them as other buyers have cottoned on to the dangers of such schemes. This certain development is in the suburbs of West London.

mh8782

Just to clarify a few points, and I say this having thought about the pros and cons

Bunny suggested that the valuer (not the HA) should be independent. I have contacted the valuer, and he does work for a separate firm of estate agents within the area.

Secondly, it's not the case in my area that the shared ownership HA properties are more expensive than non-shared ownership properties. If anything, they're cheaper.

I appreciate your concern with shared ownership and I know they're not perfect

Yorkie1

So is the valuer an estate agent or a RICS surveyor? Because we all know that estate agents' valuations are spot on ...

mh8782

Yorkie,

There was a valuer from Santander (a RICS surveyor) and another valuer, also a RICS surveyor, who was employed by the HA

Yorkie1

Oh, harder to fight it in principle if the HA one was also RICS. Hmm.