Previous owner bought below market value...

dean182

Sorry this is a long one but I hope that someone can give us some advice...

As the title suggests the previous owner of our new home bought the house for less than the market value 6 months ago. We have now agreed a price that is £23,000 more than she paid. The house has been sort-of renovated which we presumed had been done by her. Our solicitor asked her solicitor what works she had carried out and the reply was 'no comment', the solicitor is not satisfied that the property has risen by such a significant amount in such a small period of time with no work taking place. So he has concluded that she must have paid less than market value, which (excuse my limited knowledge!) means that if under the insolvency laws the previous owner goes bankrupt then the home is returned to him within the next 5 years!

I hope that all makes sense, I just wondered if anyone else has gone through this and how it was resolved.

Thanks

Anna

mystic_trev

dean182 wrote: »

So he has concluded that she must have paid less than market value, which (excuse my limited knowledge!) means that if under the insolvency laws the previous owner goes bankrupt then the home is returned to him within the next 5 years!

No, your wrong and I don't know where you got the idea the Property could be returned!

The buyer is what known as a "flipper" They buy property and sell it on at a profit. OK in a rising market, no so good when prices are going down!

lynzpower

you obviously thought the property was worth what you offered

markets change, by the nature of them, some people will pay more for a product then sell it to you at a loss ( eg buying milk from a supermarket)
You dont find many people complaining about that!

dean182

The information came from my Solicitor. From what I have been told the owner purchased it from her uncle before he moved to spain. He wanted to give her a leg-up onto the housing market, hence the price.

mystic_trev wrote: »

No, your wrong and I don't know where you got the idea the Property could be returned!

The buyer is what known as a "flipper" They buy property and sell it on at a profit. OK in a rising market, no so good when prices are going down!

dean182

I'm not really sure what you mean. We are very happy with the purchase price, next door sold for £13,000 more a few weeks ago. The question was in regards to the insolvency laws.

lynzpower wrote: »

you obviously thought the property was worth what you offered

markets change, by the nature of them, some people will pay more for a product then sell it to you at a loss ( eg buying milk from a supermarket)
You dont find many people complaining about that!

Doozergirl

I have no idea what you're on about! I've never heard of it, not to say it doesn't exist but...

If you buy the property, the whole conveyancing process is there to cover every element. There's no way a mortgage company would loan on property if the possible outcome was that it would be transferred to someone else.

You can sell a property for whatever price you want to the only catch might be that your buyer would have to pay SDLT on the full value if it were seriously off kilter.

What outsider can really decide what market value is? If a property is refurbished then it's value will vbe afftected. If it is then renovated, who is able to compare the condition before and after in order to determine whether it was sold too cheap?

If I can buy a property, renovate it and make a profit, then I must have paid below market value originally. No-one has ever mentioned that I might lose the property, nor have I ever heard of it happening.

I bought a flat in London that rose £30,000 in 6 months last year!

nelly_2

and just when you thought you'd read it all.......................

kingkano

I think something is going cross purposes here. It's possible that if the uncle goes bankrupt, because he has sold it cheap (partly gifted the house I guess?) to this woman, then there is intricacies there??? But once she has sold it to you... there is no way that it can be returned to him I would have thought. Ask your solicitor to clarify that point (they sometimes aren't the most clear people)!!

I'm guessing if the above happened they would actually go after her for the money, not you for the house The laws are there to stop someone giving away all their assets then claiming bankruptcy to avoid their debts.

dean182

That is exactly what my Solicitor said, except because of insolvency laws we would lose the house... I'm no expert but he did explain it very well and it did seem to make sense.

I had a call from the EA; my Solicitor has asked her to foot the bill for the insurance to cover us against this happening, it's only £150.

I can't believe nobody else has been through this... oh well I'm sure it will be resolved eventually.

kingkano

Interesting. thanks for sharing Seems you can get an indemnity policy for ANYTHING these days lol.

silvercar

I've heard of this.

Say person A is in financial difficulties and has a home which has some equity remaining in it after all the mortgages, secured loans business charges etc are counted. Now if A sells the property to B at below the market value (either to a relative or friend or to a "quick sale" company to release funds) the value of the price drop is money that the Official Receiver would have used, once the house is sold, to repay the creditors.

The official receiver then has the power to undo the sale, so that the equity can be used to repay creditors.

Whether he can do this to a subsequent buyer I don't know, because the equity will now be in the pocket of the person that sold it to you.