Should we buy the leasehold before we sell?

lisa76

Bit of background: Hubby and I split up in 2006, he bought a property for £124950 and lived there for 3 years. He then moved back in with me and we have rented (at a loss) for 3 years. The tenants now want to move out and we are looking at selling.

The property is leasehold (59 years remaining) and two estate agents have said that to sell leasehold they'd value between £114k and £118. If we buy the freehold it'll be between £125-£130k.

We've just had the valuation for the leasehold and it's £3500 + £350 legal costs. I'm not sure if this is a fair valuation - I'll be looking at the leasehold advisory website tomorrow with my facts and figures.

Hubby's mortgage is £103000 and the redemption is £2100.

With conveyancing costs at around £500 he's not going to be as 'up' as he thought. I don't think he'll have to pay CGT as it's been running at a loss for 3 years. Stamp duty is another consideration.

Sorry, after all that waffle we're just not sure if we should go ahead and get the freehold before we sell. We've stuck it on gumtree and freeads but no bites yet!

Any advice, if anyone's been in a similar situation, would be appreciated. Thanks

cattie

Do you mean should you buy the freehold or should you extend the lease?

If you are talking about the freehold purchase, then the price you quote sounds very good compared to the cost of a lease extension.

You need to do something as the flat is virtually unmortgageable with such as short lease and a cash buyer is your only option in the current situation.

mynameisclare

lisa76 wrote: »

two estate agents have said that to sell leasehold they'd value between £114k and £118. If we buy the freehold it'll be between £125-£130k.

We've just had the valuation for the leasehold and it's £3500 + £350 legal costs.

I think you answered your own question!

lisa76

Oh I didn't know you could extend a lease, perhaps I'll look at the cost of that as well. I'm surprised that mortgage lenders won't lend to people with less than 60 years on a mortgage (that's what I've read anyway) - after all that's longer than most people spend in their homes isn't it?

lisa76

mynameisclare wrote: »

I think you answered your own question!

Ha I know - once it's written down it's kind of clear isn't it!!

G_M

lisa76 wrote: »

Oh I didn't know you could extend a lease, perhaps I'll look at the cost of that as well.

What do you think this is for?

We've just had the valuation for the leasehold and it's £3500 + £350 legal costs.

After all, from what you say you already own the lease.

I'm surprised that mortgage lenders won't lend to people with less than 60 years on a mortgage (that's what I've read anyway) - after all that's longer than most people spend in their homes isn't it?

If after, say, 10 years, the borrower defaults and the mortgage lender reposseses, the lease will be 50 years. And the mortgage lender will have difficulty selling, to re-coup their loan. Certainly the value will have fallen even if a buyer can be found.

propertyman

Your solicitor will be able to time the sale, assuming you have a buyer, with the purchase of the freehold so that you will only be paying legal costs.

Don't forget to tell the buyer to tell their solicitor and lender that they are simultaneously buying the lease and the freehold and will, on completion, be "cancelling" the lease the term is surrendering the lease, to themselves, as freeholder..

lisa76

Thanks propertyman, we haven't got a buyer yet so we're wondering if we should buy the freehold first. The quote we have from the landlord is valid for 28 days. At the moment I've got it advertised as leasehold but I think I'll take that off the advert and discuss if we get any viewings.

lisa76

I've been looking at the lease advisory website and I've now written to the landlord to ask if he would consider a lease extension. This apparantly is free but ground rent can be charged at todays value. I will await their response. I've also just had a thought that as they are a property developer, maybe they'll buy the property themselves as an investment - something to think about!

lisa76

Well the Landlord doesn't buy old properties so that's a no go, and they won't agree to a lease extension at this time. Oh well, worth a try!

Off to find £4k on the hope we can sell :eek:

hazyjo

Don't forget stamp duty kicks in at £125k (unless you're in an area that's £150k or completely exempt).

Nobody will want to pay between £125-130k.

Is this a leasehold house we're talking about, btw?

Jx