Purchase price - Vendor paying 5%

NewbeeT

Hi there

I am about to exchange on a property, the purchase price is £175995 , Taylor Wimpey are paying 5% ,I have 15%, so HSBC have given me a mortgage of £140795.
The Valuation came in at £167195 -And on the survey the £8800 incentive is mentioned. So I guess they treat the 5% as a discount in theory.
My solicitor is saying that HSBC need to mention that the price is £175995 on the offer document and not the valuation amount. HSBC have come back saying " they are happy to proceed based on the allowances" ie aware of the incentive.
They do not and will not put the purchase price on the document. I dont see why it needs to be stated anywhere?
Anyone come across this before? I am not sure why I cant exchange without this

Help much appreciated.

kingstreet

What purchase price did you put on the mortgage application? £175,995 or £167,195?

The surveyor is given the figures by the lender, so it's likely the figures were wrong to start with. A surveyor wouldn't pick that figure doing a valuation, so it's been put there in the first place.

The other alternative is the CML sheet the surveyor is given by the developer. This sets out any discounts or allowances and how they are given. If there are incentives totalling more than 5% of the gross price of the property, they may be deducted from the valuation at the lender's insistence.

The contract should be worded "the purchase price will be £175,995 with 5% deposit being paid by builder, leaving £167,195 to be paid." This is the contract prepared by the builder's solicitor and sent to yours. Did it say that?

£175,995 should then be entered as the purchase price on the mortgage application, with the deposit set out as;-

£8,800 by gift from builder
£26,400 by savings/parental gift etc

£140,975 would then be the mortgage amount required and requested on the application.

The paperwork has to properly reflect what is actually taking place. Some solicitors won't co-operate with gifted deposits, so is it possible your solicitor has decided not to do so and has instructed the lender accordingly, as he may be acting for it, as well as for you?

NewbeeT

The HSBC mortgage broker submitted everything and originally is had the price as £175995. But I do see that on one of the final documents he mentions the figure at £167195. My first mortgage offer before the valuation states £140796 borrowed against the purchase price of £175995.
The valuation report has the correct purchase price and mentions the incentives and the final valuation is the exact figure less incentive.

The bank then revised my mortgage offer saying I had to take a higher rate due to the valuation now being £167195. I had 85% LTV and the original rate the offered was now only valid on 80% LTV properties since a rate increase.
What are the implications if they wont put this figure anywhere on the documents? They do know about it .

Thanks for your help,

NewbeeT

and yes, the contract states £175995 and £8800 paid by the vendor. Clearly.

kingstreet

You won't be able proceed on the way the paperwork is currently set. By using the net price as the valuation figure, the lender is effectively making your 80% mortgage (£140,795 on £175,995) a loan to value of 84%, (£140,795 on £167,195).

It needs amending. You need to get in touch with the lender and explain what has happened.

It's amazing the number of lenders who don't understand builder's deposit cases and how to administer them, or simply assume a price reduction and a builder's deposit will end up with exactly the same result. They don't.

The builder will also balk at reducing the price, as it will affect future sales on the site if their property is effectively down-valued.

NewbeeT

Also my solicitor is the one recommended by Taylor Wimpey as they are well versed in dealing with incentives. I had wanted to use one from HSBC panel but because HSBC approved mine I left as is. Thanks again for all the info .

kingstreet

It's unlikely to be the solicitor, to be honest, but I thought I'd mention it anyway.

You are only receiving the builder's deposit of 5% aren't you? There are no other incentives which will cause the 5% limit to be exceeded?

NewbeeT

I have had constant discussions with them and they say they cant and wont put the purchase price on any documents. They say it is irrelevant. I am extremely worried that this could mean I lose the apartment. What can I do if the bank wont budge?

NewbeeT

Just 5% deposit , that is is. Nothing extra, bare bones apartment .No flooring or anything like that.

kingstreet

Ask them this simple question;-

"does HSBC accept builder gifted deposits of 5%?"

If they answer in the affirmative, ask your solicitor to speak to the lender's completions department to see what they suggest.

If the answer is negative, accept the deposit as a reduction in the price (if permitted by builder) and proceed with the purchase on the lower price and higher loan to value.

Last, change lenders?

NewbeeT

They definitely do , at the initial chat with the broker , he looked into it and said as long as they get the Incentives Disclosure form , they are fine with incentives .