Selling Shared Ownership

JaeSmiffy

My brother bought 35% of a 2 bed flat on a shared ownership scheme 3 years ago when the value was said to be £170,000 (I thought this sounded high personally).

He now wants to sell it and had an independent valuation which has come out at £117,000!

Therefore he originally mortgaged £59,500 as per his 35% share which will now be worth £40,350

Therefore will he be liable for the whole £19,150 loss he will make if he sells the 35% off?

Thanks for your assistance

99sc1610

Yes, he will have to take the hit on this.

This is a common situation and i'm sure many will take the chance to attack shared ownership schemes. However much of the problem is due to developers charging above market value on new builds

nate_dog

I would suggest that this shows one of the benefits of shared ownership, imagine how much worse off they would be if they had bought 100% of the property!

PasturesNew

Yes, in order to sell he will have to find/pay the difference to the mortgage company in order to complete the sale. So he can't even owe it to somebody, he has to pay it to sell.

He might now want to sell, but, if possible, he's best off staying put and saving his nuts off for the next 5 years.

JonnyNewBuild

Was the original valuation of £170k not from an independent valuation?

I'm in a shareed ownership flat that was originally listed as £265k but under the terms of the scheme everyone buys or sells at an independent valuation which meant we eventually purchased 40% of £220k. Did his scheme not work the same way?

betmunch

nate_dog wrote: »

I would suggest that this shows one of the benefits of shared ownership, imagine how much worse off they would be if they had bought 100% of the property!

Damn, I wanted to say this!!!!

Would have been pretty sweet to get that in right after the "Shared Ownership is a Scam" lot had been on deriding the OP for buying!

poppy10_2

nate_dog wrote: »

I would suggest that this shows one of the benefits of shared ownership, imagine how much worse off they would be if they had bought 100% of the property!

The point is, if it wasn't a shared ownership property, the housebuilder wouldn't have been able to get away with the blatantly ridiculous overvaluation that they pulled off with the SO deal. If it had been on the open market, the OP would have been paying 100% of a much lower purchase price, rather than 35% of an artificially inflated price.

SO schemes exist only to prop up failing housebuilders by allowing them to mark up properties that they would otherwise have to drop the price to sell.

Ulfar

betmunch wrote: »

Damn, I wanted to say this!!!!

Would have been pretty sweet to get that in right after the "Shared Ownership is a Scam" lot had been on deriding the OP for buying!

I think the brother may need to re-read his contract paperwork very carefully as some of these schemes are drawn up such that any loss in equity value comes of the owner first and not the part retained by the housing association.

In this case the brother could only have £6000.00 which will get eaten up by fees.

You have to be very careful with shared ownership and the different terms offered.

MarkyMarkD

poppy10 wrote: »

The point is, if it wasn't a shared ownership property, the housebuilder wouldn't have been able to get away with the blatantly ridiculous overvaluation that they pulled off with the SO deal. If it had been on the open market, the OP would have been paying 100% of a much lower purchase price, rather than 35% of an artificially inflated price.

SO schemes exist only to prop up failing housebuilders by allowing them to mark up properties that they would otherwise have to drop the price to sell.

Tosh. The property is valued by a valuer on behalf of the lender, and they are not going to accept an over-valuation on a new shared ownership property any more than they will do on any other new build property.

As others have said, there is a premium for a brand new property and that is inevitably lost when selling "second hand", particularly if other new builds are now available at a lower price.

brit1234

MarkyMarkD wrote: »

Tosh. The property is valued by a valuer on behalf of the lender, and they are not going to accept an over-valuation on a new shared ownership property any more than they will do on any other new build property.

As others have said, there is a premium for a brand new property and that is inevitably lost when selling "second hand", particularly if other new builds are now available at a lower price.

Sorry you are clearly wrong, have you missed the last decade perhaps:

1. Irresponsible lending
2. Unsustainable house price growth
3. Stupid schemes to allow prices even higher
4. Pop
5. Credit crunch
6. falling prices
7. tighter lending

There is clear evidence that shared ownership bumps up the price just look on right move for mixed developments and compare prices. I have witnessed personally developers inflate property prices when shared equity appeared.

What was all that gift deposit fiasco if not surveyors overvaluing.

People say it is supply and demand that regulate prices when it is actually supply of credit instead. Shared ownership is simple a way for people to borrow more and push up prices.

Luckily most lenders have abandoned shared ownership due to over valuations and other issuses.

Its a scam

gazfocus

Could it not also work the other way round (i.e. if the house is worth less now, your brother could buy more shares in the property for a lower price)