Fraud accusations

<sebb>

I'm posting this on behalf of my friend and therefore may not have all the details.

She is buying a flat in greater London. The flat was on the market for £285K and she had an offer accepted for £265K. Her own survey and the mortgage survey came in at £285K. She applied for a mortgage for £230k with the rest being her deposit.

The sale was progressing as usual, until one day she received a call from her solicitor's "business manager" telling her there was something wrong with her application.

He said that she had applied for a mortgage for that was greater than the offer price and that she was trying to "pocket 20 grand". He then went on to tell her that she could go to prison for 5 years for mortgage fraud. She was clearly confused, and upset and asked him to recheck the paperwork - he was mistaken. He told her to "watch what she was saying" and that he would hang up and terminate dealings with her. He then went on to say things such as "I'm not going to prison for the likes of you". She explained the numbers again clearly, at which point he backtracked and claimed that although she hadn't tried to apply for a mortgage offer over the asking price, he thought that there must be some sort of fraud involved as there was no way a vendor would accept an offer of £20k under the asking price. He then told her that her case was obviously "very complicated" and it had to be referred to the senior solicitor who charged £400+VAT per hour and that she would have to pay for this. He then insisted that she pay for the accrued solicitor fees to date as she "couldn't be trusted".

To make matters worse, he has insisted that the vendors write a confirmation letter to state that they are aware that the value of the house is £285k but they are willing to accept an offer of £265k. The vendors are now saying that they are reconsidering her offer. The solicitor has also said that even if they do retain the existing offer, then she needs to buy indemnity insurance, as if the vendors go bankrupt in the next 5-7 years (I can't remember the term) then any insolvency practitioner could come after her for the difference if the vendors go bankrupt.

She complained to her solicitor, and said she would not have any further dealings with this man. He has replied to say that this could not possibly have happened, because if fraud was suspected they would have stopped acting for her immediately and he hopes this resolves her complaint. If not, she is free to take her business elsewhere. He did not mention the additional fees.

She is still waiting to hear from the vendor as to whether they would like to proceed at the agreed price.

Any advice or suggestions as to what she should do next? I'm not sure she can actually prove any of this as it was all on the phone, so not sure she has any comeback, but this has been very upsetting and could potentially cost her thousands of pounds. She has said she will not increase her offer, but will lose around £1500 in fees if she pulls and she actually wants the flat.

magpiecottage

I suggest you look here.

paso11

Might be worth writing a letter to the managing partner of the solicitors firm.

Assuming no one held a gun to the vendors head it seems like a price was freely negotiated between vendor and buyer so why would the solicitor have an issue with this?

Property valuation is subjective, and it seems this intervention by he solicitor might have derailed the transaction.

It seems shocking he would accuse his client of fraud without some form of backup.

haras_nosirrah

I assume the problem was she put the purchase price on the mortgage application as the higher figure hnce why the solicitor brought it up and the lender val was at the higher figure when she was doing a 20k vendor gifted deposit which was undeclared - this would then explain the solicitor as they have 265k purchase price on their paperwork but the mortgage offer says 285 purchase price. The comment about pocketing 20k would also make sense as would the bankruptcy declaration as the or could go after the 20k if the vendor went bankrupt. Mortgage should be based on the 265k purchase price as vendor gifted deposit doesnt exist now unless it is a close relative selling the property. Your friend needs to change the purchase pricevdeclared to mortgage company

maninthestreet

haras_nosirrah wrote: »

I assume the problem was she put the purchase price on the mortgage application as the higher figure hnce why the solicitor brought it up and the lender val was at the higher figure when she was doing a 20k vendor gifted deposit which was undeclared - this would then explain the solicitor as they have 265k purchase price on their paperwork but the mortgage offer says 285 purchase price. The comment about pocketing 20k would also make sense as would the bankruptcy declaration as the or could go after the 20k if the vendor went bankrupt. Mortgage should be based on the 265k purchase price as vendor gifted deposit doesnt exist now unless it is a close relative selling the property. Your friend needs to change the purchase pricevdeclared to mortgage company

You're assumimg a lot here - why would the OP's friend apply for a £285K mortgage if they had an offer of £265K accepted, and they had a £35K deposit as well?
The OP also clealry states the mortgage application was for £230K.

Thrugelmir

maninthestreet wrote: »

The OP also clealry states the mortgage application was for £230K.

The lenders valuation suggests the application was based on a purchase price of £285k not £265k.

The solicitor represents both the borrower and lender. So would have noted the figures being different.

With a higher purchase price improves the LTV to around 80%. Which presumably met the requirement for the mortgage product applied for.

haras_nosirrah

I have never known a lender val come in at higher than the purchase price so my assumption comes from the valuations coming back at 285k. If the buyer was putting down a 35k deposit on a 265k house it would be 86% ltv and high rates. On a 285k purchasr price her 55k deposit would be 80% ltv. I might be wrong but it seems the most plausible reason for the solicitors reaction. Maybe the op can clarify

holly_hobby

<sebb> wrote: »

The flat was on the market for £285K and she had an offer accepted for £265K. Her own survey and the mortgage survey came in at £285K. She applied for a mortgage for £230k with the rest being her deposit.

To make matters worse, he has insisted that the vendors write a confirmation letter to state that they are aware that the value of the house is £285k but they are willing to accept an offer of £265k.

To put it in a nutshell ...

The purchase price is 265k not 285k - on which she wants a mge of 230k - this is where the confusion has come from, she has put down the marketed price i.e 285k instead of the agreed purchase price of 265K.

As it stands i.e 285k on 230k, it would appear that the Vendor is doing a gifted deposit of 20k - which is not permitted, and in fact not the case.

So, she needs to contact the lender and tell them the mis-understanding and that the pch price is 265k NOT 285k, the valuation will obv support the reduced selling price, if it has already valued up at 285k (which will have been the noted pch price on the mge app).

Obv the LTV will now increase as its 230/265, so this may affect qualification for the product already chosen, to which she may lose any booking/reservation fee.

The Sol. although ham fisted, has actually done his job, and spotted the abnomality in the figs - although his manner could be improved upon I dare say (but it sounds as though he's gone into a panic, without thinking through what the plausible explanation for the discrepency may be .... learning curve for all I think !)

Hope this helps

Holly x

<sebb>

haras_nosirrah wrote: »

I have never known a lender val come in at higher than the purchase price so my assumption comes from the valuations coming back at 285k. If the buyer was putting down a 35k deposit on a 265k house it would be 86% ltv and high rates. On a 285k purchasr price her 55k deposit would be 80% ltv. I might be wrong but it seems the most plausible reason for the solicitors reaction. Maybe the op can clarify

You sound like the business manager! There was no gifted deposit and the facts were as I stated in my original post. She's aware it's a high LTV. she's paying 5.5% fixed for two years

Her application was correct which she double checked and I also checked. The only place the £285k appeared was on the mortgage valuation survey. Not on the mortgage application form. She has never written that figure anywhere.

The business manager got it wrong plain and simple. I think he made some of the assumptions that are being made on this thread.

she's now been told there is no problem with the paperwork so the business manager couldn't possibly have said those things.

The vendors are coming back to her on Monday to decide whether they want to go ahead with the sale or hold out for a higher offer.

kingstreet

It sounds like the purchase price was wrongly inserted on the valuation sent through to the surveyor. The amount being paid is pre-printed on there.

The surveyor will normally go along with that figure unless the vendor tells him the purchase price is different on the day, or he feels the property is worth less.

If the sales memo says £265k, the mortgage offer says £265k and the purchasing client says £265k, the solicitor is acting on one piece of information, which is like trying to draw a dinosaur from a single jawbone.

The borrower should report this immediately to the lender which will enable the necessary correction to be made.

<sebb>

kingstreet wrote: »

It sounds like the purchase price was wrongly inserted on the valuation sent through to the surveyor. The amount being paid is pre-printed on there.

The surveyor will normally go along with that figure unless the vendor tells him the purchase price is different on the day, or he feels the property is worth less.

If the sales memo says £265k, the mortgage offer says £265k and the purchasing client says £265k, the solicitor is acting on one piece of information, which is like trying to draw a dinosaur from a single jawbone.

The borrower should report this immediately to the lender which will enable the necessary correction to be made.

Thank you for your reply. Does this mean that the indemnity insurance isn't necessary?