Furniture as part of the mortgage?

Steve_K_2

Morning all. My offer on a house was accepted yesterday and after a discussion with the seller, she is willing to sell the furniture and all appliances with the house. The issue I have is that the estate agent is saying that the furniture has to be added to the price of the property as it is illegal to buy the furniture separately. It doesn't sound right to me. If they add the price of the furniture to the mortgage then effectively I'm paying interest on it and when the valuation is done, none of the furniture is taken into account. Plus my stamp duty is higher. I was planning on paying cash for the furniture. Something didn't sound right to me. Sounds like it's the estate agent trying to up their percentage take. Any information would be greatly appreciated.

Steve

mrginge

You can buy the furniture separately but it must be declared to your solicitor and listed on the sdlt declaration. It is therefore subject to stamp duty along with the house itself.
The value attributed must be appropriate or it would be seen as tax evasion.

It doesn't affect the mortgage in any way.
Discuss this with your solicitor, not the estate agent. Remember that the former are qualified to offer advice on this subject whereas the latter are usually incompetent spivs who make things up as they go along.

Lou24

Furniture has nothing to do with the estate agents.

We got the white goods and table and and other bits with our house.

The solicitor sends you a form out which asked what's included in the sale of the house

You must write down everything in that box

Washing machine,fridge,dressers and so on

Hope that helps

Steve_K_2

Yeah that's what i thought Lou. The estate agent was saying that it is illegal to buy the house and furniture separately and that it must be combined with the cost of the house.

Senior_Paper_Monitor

The ONLY issues (England & Wales) here are:


1) the difference between 'fixtures and fittings' and 'chattels' ...


For example fixtures and fittings include:


fitted kitchen units, cupboards and sinks
agas and wall mounted ovens
fitted bathroom sanitary ware
central heating systems
intruder alarm systems.


Externally, any plants, shrubs or trees growing in the soil which forms part of the land.


Such items are to be included in the house sale (and cannot be separated) and as such attract SDLT liability.


2) For example chattels refers to


carpets (fitted or otherwise)
curtains and blinds
free standing furniture
kitchen white goods
electric and gas fires (provided that they can be removed by disconnection from the power supply without causing damage to the property)
light shades and fittings (unless recessed).


Externally, any plants growing in pots or containers.




Fixtures and fittings make up the sale price of the property, and as such are included in the total transaction value for the purpose of SDLT calculation.


The sale of Chattels are a separate transaction and do not attract SDLT.


2) However, because the sale of the chattels, while a separate transaction, is a conditional transaction on the SDLT transaction it is therefore reported as such.


HMRC are very aware that vendors/buyers can use this parallel transaction to move value from the house sale to the sale of the chattels, thereby evading SDLT liability (this becomes most obvious and its impact greatest) where this enables the house transaction to take place within a lower tax band (i.e £250,000 with £10,000 for chattels, rather than £260,000).


HMRC therefore consistently review the conditional transactions (and require full item by item detail of the chattels and their market value in current condition) to ensure this does not take place.


Be aware that the price of second hand furniture (and most chattels) is very low - look in any charity or second hand furniture store.








Final question to answer - the 'chattels transaction' is totally outside the mortgage. You will conduct the SDLT transaction (house including fixtures and fittings) with a mortgage and cash deposit. You will conduct the chattels transaction with separate funding (presumably cash).

Steve_K_2

Thanks for the in-depth reply. Basically, i'm buying a large 5 bedroom property that the current owner rents out currently. All rooms are fully furnished and as such, everything that is currently in the house, from washer and dryer to beds and sofa's are included. She's asking for £2000 for it all which in my mind is incredible value if you saw the quality and amount of things in the house. She is moving abroad so just wants a quick sale. So in effect i'm buying a fully furnished house. Fully furnished or not, the solicitor is saying that the additional £2000 HAS to be added to the purchase price (i.e the amount to be mortgaged.

amnblog

Steve_K wrote: »

Thanks for the in-depth reply. Basically, i'm buying a large 5 bedroom property that the current owner rents out currently. All rooms are fully furnished and as such, everything that is currently in the house, from washer and dryer to beds and sofa's are included. She's asking for £2000 for it all which in my mind is incredible value if you saw the quality and amount of things in the house. She is moving abroad so just wants a quick sale. So in effect i'm buying a fully furnished house. Fully furnished or not, the solicitor is saying that the additional £2000 HAS to be added to the purchase price (i.e the amount to be mortgaged.

Where did you get the solicitor from Steve? The estate agent?

If you imagined you lifted the house up and turned it upside down, the bits that fall out are not fixtures and fittings and not part of the property.

Of course you can buy the furniture, but you cannot inflate the purchase price with them, nor mortgage them.

You are at liability to pay a price over the value, but the mortgage will be based on the lower of the price or the valuation.

Senior_Paper_Monitor

The solicitor is wrong !


He/she will report it as a conditional - but separate - transaction which will be completely external to the mortgage considerations.


As described, it is not a transaction that will cause any issue for HMRC (or any other party) and you would have no SDLT liability on the £2k.

amnblog

Senior_Paper_Monitor wrote: »

The solicitor is wrong.

My guess of the today is that the solicitor was recommended by the Estate Agents.

They probably know each other from their days with Billy Smart's.

Steve_K_2

The offer was only accepted last night so i've got an appointment with the solicitor this afternoon. Both solicitor and estate agents are local to me. So here's the in-depth details of what has happened, please bare with me: The house was up for £134,950. I made an offer of £133,000. The owner has said that they wanted £134,080 as the additional £1080 would cover their legal fees. Which in my mind would equal total purchase (mortgage applicable) price of £134,080. Then i would purchase the furniture for £2000 cash once i'd seen the inventory. The estate agent phoned me last night and said that the only way i could legally do it was by paying £133,000 for the house and adding the furniture on top to total £135,000 purchase price (mortgage). Then i would separately pay for the sellers legal fee's of £1080 (payable to the estate agent). This all seems backwards to me.

amnblog

The Estate Agent is an idiot and SPM has correctly assessed the right option earlier on this thread.