Seller pays stamp duty

firstaspect

It isn't that common but there's no harm in asking. All they can do is say no.

TrickyDicky

Why are people replying to 3 year old threads?

firstaspect

TrickyDicky wrote: »

Why are people replying to 3 year old threads?

Oh yeah, didn't realise it was until you just said that!

Thrugelmir

TrickyDicky wrote: »

Why are people replying to 3 year old threads?

More to the point why dig them up? :eek:

maninthestreet

disintermediation wrote: »

Lets to the maths here. These days you need 15% or 20% down on a house. That is at least £35.5k on a £250k house. Then there is the solicitors fees and moving costs and surveys and the basic rate stamp duty of £2.5k. Realistically your going to be spending £40k of cash.

But if the house is worth just above £250k the tax jumps from 1% to 3% as UK stamp duty it is not a graduated tax. Say you think its worth £260k the tax is now £7.8k. That's £5.3k more! You need to spend £45.3k of your savings rather than £40k. Thats a 13% increase in the amount of cash you have to burn. That £5.3k more tax sounds small compared with £260k but its serious money when compared to your hard cash outlay.

So if you are a no chain buyer for a quick sale offer "£260 if you pay £5 cash to cover the uplift in the stamp duty". The seller takes home £255k with no chain which beats all the £250k offers they had over the last few months (with or without chains). You don't give the tax man an extra £5k which you could have spent decorating, on a new kitchen, on a new bathroom suite, new carpets, on new furniture, on xmas, given to charity, set fire to in the garden, ...

For the seller it is only their net take away which matters. Asking the seller to contribute towards stamp is called a "incentive" by the solicitors and the mortgage company. For the seller a deal of £300k with a £45k incentive is the same as a deal of £260k with £5k incentive; both net to £255k. The difference for the seller they don't have to take the money out of their savings. On the day of completion the incentive is funded by the money the buyer is putting down. Its a cashless transaction for them; whatever is the net on the deal they bank. It is all about the cash. Ultimately the money of the incentive is actually funded by the buyers mortgage.

The mortgage company are looking at a £5k difference between the price offered and what the vendor took home; so long as they calculate the loan to equity at £255k they cannot possibly be left exposed. The worst they can do is say for lending purposes they will only lend you 85% of the net £255k not 85% of the agreed price of £260k. That means you have to stump up the cash but the property is sold for £260; the £5k is on the value of your home not with the tax man.

I do agree that the new home sellers are baking the tax back into their business model and hence the asking price. Yet its still about the cash. The new home seller adds the stamp duty to the price, say its a £200k flat so thats £2.5k incentive. The first time flat buyer is getting a 85% equity mortgage. So for the extra £2.5k baked into the price they only have to put down 15% which is £375. That means that rather than paying the tax man £2.5k of savings they pay out cash £375 more on the deposit. The £2k tax they did not give to the tax man buys them a bed and a sofa to go into the empty flat they just bought; as a young first time buyer they sure needed that cash to spend on the home...

Its all about the cash. Mortgages are leverage to put your money to work. Tax is nothing but squander if you can optimize it out of the question.

Advice to a newbie: Don't ressurect three year-old threads.....