How accurate are LR sold prices?

jimpix12

According to what I've read on the internet in various places, the Land Registry sold prices are accurate, although I've seen some MSE-ers stating that they are in fact not that accurate. Can someone clarify why they might not be truly accurate, and if they true sold price might be lower/higher than is available?

I plan to use the LR sold price figures from a previous development in my negotiations on their current development but wondered what sort of excuses I might be up against.

brit1234

They are the most accurate, however there was wide spread LR manipulation/fraud during the boom years. They should be pretty acurate for second-hand homes but becareful with newbuilds as there is still plenty of fudging being attempted.

jimpix12

What sort of fudging should I be aware of?

In short I've come across some houses I like, by a local house builder. The same house builder built another development of similar houses nearby last year, looking at the sold prices from the LR, one is 18% below the asking price. So I'm just wondering if it's likely that this is inaccurate, or that the other sold prices on this development (typically about 10% below asking) are not accurate?

G_M

The LR prices obviously rely on the figures the buyer/seller and their solicitors put onto the various documents (Contract; Form TR1 [transfer of land]; Stamp Duty declaration; etc)

If, as brit says, they 'fudge' these (eg to defraud HMRC out of Stamp Duty, or as part of some part-exchange scam with property moving on to other parties etc), then the LR will only get the 'real' sale price if the fudge/scam is discovered.

Strapped

There can also be (small) changes at the last minute to the purchase price, done by something I've forgotten the name of, which isn't reflected in the contract price reported to the LR. (eg We gave an extra £1k to our vendors on exchange day - don't ask! - but didn't have to go through the rigmarole of re-signing the contracts or anything).

jimpix12

Ok, thanks. It would appear then, that the only reason a sold price would appear to be 15% below the asking price is because it actually sold very close to that, or for that. I've been looking at further sold vs asking prices and 15% on a new build isn't actually that far-fetched...

jamesd

15% or 18% below the asking price on a newbuild wouldn't be at all surprising. Nor would 10% for the others. Bargains struck and negotiating power things like a cash purchase rather than mortgage can make a difference. The 10% ones might have had an undisclosed vendor incentive, the 18% one might have had it properly disclosed and lowering the declared sale price, but not the effective one for the buyer. The builder might have wanted the cash flow enough to take a reduction. Many other things.

Newbuild and to a less extent converted flats were notorious for inflated valuations during the boom years. Next perhaps were newbuild houses.

brit1234

I would use that sold price and factor some more off dependant on when it sold as prices in your area have most likely fallen since then. Again there are Land registry reports for the general area. So find the one when the original house sold and then the latest one for general area and use that to reduce % difference to your offer on top. Maybe reduce it a little more on top as the land registry data is about 4 months behind today.

Good luck.

jimpix12

brit1234 wrote: »

I would use that sold price and factor some more off dependant on when it sold as prices in your area have most likely fallen since then. Again there are Land registry reports for the general area. So find the one when the original house sold and then the latest one for general area and use that to reduce % difference to your offer on top. Maybe reduce it a little more on top as the land registry data is about 4 months behind today.

Good luck.

Thanks, it sold in September 2011 so that's about 4 months ago i.e. not been updated. Should I base my new price on Nationwide figures as these are monthly, i.e. increasing by 10% a month still?? :rotfl:

In all seriouesness it looks like Halifax said prices reduced by 0.9% in Dec.

jimpix12

So I've done more research and seen this: http://www.housepricecrash.co.uk/indices-halifax-national.php

So over Sep-Dec prices changed by -0.5+1.2+-0.9+-0.9 = -1.1% therefore I'll reduce my offer down by a further 1.1%. Will post back any news tomorrow.

Richard_Webster

The fudge isn't a SDLT avoidance issue - it usually results in more SDLT being paid.

Builder puts in £200K in contarct and Transfer Deed (and therefore buyer has to put that on SDLT forms and pays £2K SDLT) but makes an "allowance" of £20K so buyer only really pays £180K. Builder then tells another potential buyer of similar house that he is getting it cheap because he will get a £10K "discount" which is dealt with in the same way.

Second buyer has been conned!

In both these cases the LR would have had £200K as the price.

Not so easy to do now because lenders will only lend a percentage of the "real" price.

Although they may "weed out" these cases, you also see situations where e.g. one person buys out his/her ex and only pays for a half share so the price shown is half of the real value! That could distort averages in a small sample.

As has been said, it is much less likely to be an issue with second hand values and as I keep saying nobody buying a new house should compare the price with what other people have paid the same builder for similar new houses - but rather look at values of similar 5-20 year old houses nearby, because in 5-10 years time nobody will pay more for a house that is 5-10 years old rather than 10-25 years old.