Vendor paying stamp duty... permitted?

blunther

Hello all,

I had a second viewing on a house recently and am thinking of making an offer. After deposit and all fees, I'll have about 7k left over to do a bit of work on the house that it needs. As a negotiation tactic, I was considering making an offer on the basis that the seller pays the stamp duty, which'd give me a few quid more in my back pocket to do some stuff to the house. Is this 'permitted' by a mortgage lender, or would it count as a vendor gifted deposit, even if I could prove that I have the deposit plus funds left over available to me...?

Thanks!

Richard_Webster

There should be a sticky on this as it comes up so often!

Lender will normally work out their maximum loan on the proportion that the loan bears to the real purchase price.

So if they will lend 90% and you are buying for £130K with "stamp duty paid" then the real value of the property is £128,700 (seller wouldn't give you the concession if he didn't have to, so that is the "real" value of the property) and so they will only lend 90% of £128,700.

zzzLazyDaisy

I agree, this answer should be a sticky - it is unbelievable how often it crops up.

On the plus side - I have now saved a link to your reply Richard, and shall simply copy and paste it into the reply box in future :beer:

D

blunther

Well, glad to be useful in a way - thanks for the answer Richard

Odie_Schmodie

So this means that one has to find the additional deposit, is that right? I am just about to throw in the towel on a sale (I am the buyer) with a property since the survey came up with some serious problems (uncertified internal changes) and the vendors are not willing to negotiate. I have had viewings for a couple of other properties now, one of them at 265. I asked if they would accept an offer at 250 and apparently they had turned this down before. The EA said (without me asking anything like this) that the "deal" is that the vendor will buy the additional stamp duty for the bit they can get over 250, and that they are seeking to achieve 260. So basically recognizing that it will be very difficult to find anyone who will pay between 250 and 265, this is the "incentive" they are offering with the hope that they can make around 255. I said I would ask my solicitor (I already have a mortgage in place for the property I am unable to proceed with, so the lender would trasfer to another property, of course requiring a new valuation), but how does this even work? Do you just "trust" the seller to give you cash back? I am in the Brighton + Hove area (the property is further afield) and had always seen this sort of thing advertised in Rightmove ads but never heard of it. Anyone heard of anyone first hand doing this?? Thank you ;-)

silvercar

Developers do this all the time.

In practice your solicitor would retain enough of the purchase price to pay the stamp duty and pass the remaining money to the seller's solicitor.

zzzLazyDaisy

It is mortgage fraud. Plain and simple. Sorry, but I can't be bothered to go into the why's and wherefores - if you do a search you will find loads of threads.

As to your question - if you do a 'deal' with the vendor on a 'gentleman's handshake' then there is no way of enforcing the deal if the vendor fails to hand over the cash. It is what is known as 'an unlawful contract' and unenforceable in the courts.

Take the advice of your solicitor, who will say 'don't do it'!

Sorry, but the only way round it is either for the vendor to see sense (frankly he is never going to sell the property playing daft games like that) or for you to buy a house within your price range. Don't trust the EA, his job is to hook you into the purchase - he acts for the vendor!

getmore4less

Make sure the vendors know there is 250 on the table and keep looking.

Yorkie1

Richard sets out the financial maths part of it.

However, many lenders are not willing to lend at all where the seller (not a developer) is paying for the stamp duty. There was a thread on here in the last couple of days where the lender pulled their previous offer when it became apparent that this was part of the transaction.

Ivana_Tinkle

Yorkie1 wrote: »

Richard sets out the financial maths part of it.

However, many lenders are not willing to lend at all where the seller (not a developer) is paying for the stamp duty. There was a thread on here in the last couple of days where the lender pulled their previous offer when it became apparent that this was part of the transaction.

Yes, this.

We had a sale fall through right at exchange for precisely this reason. It wasn't that the mortgage co were prepared to lend less, it was that they wouldn't do it at all.

And, yes, this comes up on here all the time yet, frustratingly, most estate agents still don't seem to know that it's a problem.