Buying a House Below Market Value?

Michael229

I am a potential first time buyer. My landlord has offered to sell me the flat above me for about £20,000 less than its market value.

When I applied for my mortgage there was a question that said 'Is this property knowingly being sold below the open market value'. Can you tell me what the implications of answering yes or no are to me in getting a mortgage. The thing that I am confused about is whether I have to say 'yes' or not. For example anyone could view a property and offer £20,000 less if they think it needs work etc.

Im very confused !!!

ms_fashionista

Not sure myself exactly but there is a website that deals in this kind of thing, just follow the link

www.ahuja.co.uk/1807

This site gave good tips on mortgage lenders so hope this helps.

Moggett

There are also implications here regarding stamp duty. If HMRC find out they are losing revenue in lost stamp duty (ie £200, £600 or whatever) they will be onto you bigtime.

AJK_3

Michael229 wrote: »

I am a potential first time buyer. My landlord has offered to sell me the flat above me for about £20,000 less than its market value.

When I applied for my mortgage there was a question that said 'Is this property knowingly being sold below the open market value'. Can you tell me what the implications of answering yes or no are to me in getting a mortgage. The thing that I am confused about is whether I have to say 'yes' or not. For example anyone could view a property and offer £20,000 less if they think it needs work etc.

Im very confused !!!

I think it's all to do with bankruptcy rules... if your landlord was to go bankrupt within the 5yrs after selling you the property and he had knowingly sold the property under value then the people who he owes money are able to force the sale of your property to recoup their money. This obviously diminshes the level of security that the mortgage company has in the property hence the reason why they ask the question.
Previously people about to go bankrupt would sell/transfer property to a spouse/relative etc at a reduced price stopping their creditors getting hold of the assets. The rules were changed so that this became more difficult to do.

Vincenzo

Michael229 wrote: »

I am a potential first time buyer. My landlord has offered to sell me the flat above me for about £20,000 less than its market value.

When I applied for my mortgage there was a question that said 'Is this property knowingly being sold below the open market value'. Can you tell me what the implications of answering yes or no are to me in getting a mortgage. The thing that I am confused about is whether I have to say 'yes' or not. For example anyone could view a property and offer £20,000 less if they think it needs work etc.

Im very confused !!!

Michael229, I would be interested to know why your landlord is happy to sell you the property at £20k below market value? Have you established this with a formal valuation (by a surveyor, rather than an agent?).

WIth reference to your original question, I would definitely tick 'no'. Answeing yes will send your application straigfht to the 'fine toothcomb pile' and may delay or casue you other problems.

Jammasterjizz

Most mainstream lenders will not consider granting a mortgage if the property is sold at a discount to the open market value.

There are, however, lenders who you can go to who lend based on purchase price, rather than the open market valuation. They aren't high street lenders, but most brokers can access them. Unity, Infinity and GMAC will all lend based on the discounted price and you can buy something called 'title insurance' which will get around the problems AJK mentioned.

Gorgeous_George

By the time you own the property it could be worth £40K less so I'd answer 'No' and feel fine about it.

GG