Is this too dodgy?

Bobbyjim

Hi folks. I'm normally more of a lurker but could do with some opinions on this please:


My parents have viewed a couple of houses with the same estate agent. Recently this estate agent contacted them and said they have a house for sale; the vendor is looking for 200k for a quick sale (similar properties are between 210k and 220k).


However, the vendor has asked that they buy the house for 160k and then give him 40k in cash. Apparently he is behind on the mortgage payments and at risk of being repossessed, hence the need for a quick sale.


Clearly he is trying to hide some of the cash from the bank and/or avoid it being swallowed up by debt repayments. I've told my parents that it sounds dodgy to me but I couldn't quite explain why. My parents don't see any problem with it, other than acknowledging that they'd only want to hand over the cash after the purchase had definitely gone through.


Is this something they shouldn't touch with a bargepole? What specifically would they be doing wrong, if anything? What are the risks for them?


Thanks in advance.

Guest101

Bobbyjim wrote: »

Hi folks. I'm normally more of a lurker but could do with some opinions on this please:


My parents have viewed a couple of houses with the same estate agent. Recently this estate agent contacted them and said they have a house for sale; the vendor is looking for 200k for a quick sale (similar properties are between 210k and 220k).


However, the vendor has asked that they buy the house for 160k and then give him 40k in cash. Apparently he is behind on the mortgage payments and at risk of being repossessed, hence the need for a quick sale.


Clearly he is trying to hide some of the cash from the bank and/or avoid it being swallowed up by debt repayments. I've told my parents that it sounds dodgy to me but I couldn't quite explain why. My parents don't see any problem with it, other than acknowledging that they'd only want to hand over the cash after the purchase had definitely gone through.


Is this something they shouldn't touch with a bargepole? What specifically would they be doing wrong, if anything? What are the risks for them?


Thanks in advance.

Fraud and tax evasion? Ye I'd avoid it.


On the flip side, the vendor couldn't exactly sue them for the 40,000 after completion, so just buy it for £160,000 and then ignore them?

fairy_lights

Do your parents have 40k in cash lying round?
If they did go ahead with it, what would be to stop them buying the house for £160k and then refusing to give the vendor the rest/denying it had ever been agreed? Sounds pretty dodgy all round.

Nobbie1967

If they are using a mortgage to buy then it would be mortgage fraud. If they are using cash, then they would be avoiding Stamp Duty. I don't think any solicitor would let this go through so you may be wasting your time. If they want it to go ahead without solicitors (do your own conveyancing) there may well be a problem that a solicitor would spot, but you wouldn't.

Sounds like a can of worms and surprised the EA is even suggesting it as it seems doomed to fail. If it seems to good to be true, it probably is.

Bobbyjim

I did think that it was more risky for the vendor than for my parents. They wouldn't try to pull a fast one on him; they'd have every intention of honouring the extra cash payment. Hence their argument: why shouldn't they go ahead with this arrangement? Surely it's the vendor's problem/risk if he wants to do this?

Bobbyjim

Sorry, I should have clarified: they would not need a mortgage, they're not selling their own house (it's a holiday home) and they'd be cash buyers.

Pixie5740

Do you not think that HMRC are aware of scams like this. Your parents would only end up paying SDLT on £160k not the full £200k. Tax evasion is a crime and I would be surprised if they found any solicitor that would let them go ahead with this plan unless as cash buyers they aren't planning on using one.

libf

They'd be paying less stamp duty than they should at the very least, so there's definitely something dodgy for them in this.

Bobbyjim

Thanks guys. I thought there must be something wrong with it but couldn't put my finger on it - so it's the stamp duty that is the issue for them really. I think as far as the solicitor is concerned, it would be a straightforward purchase at the lower price; they wouldn't know about the extra cash.


I'll report back to my parents...


thanks again

Nobbie1967

I'd also be a bit suspicious of the story about being repossessed. If that's the case, then I don't think the mortgage company who hold a charge over the property would allow the property to be sold for an amount that won't clear the debt. I'd suspect this is more about trying to conceal assets from an ex partner and so they would want the £160k figure used in the contract and associated SDLT. It would be impossible to pay the correct SDLT as the forms would not have the true consideration on them. If the ex partner found out what was going on they are likely to expose this and leave your parents open to action by HMRC.

Guest101

Nobbie1967 wrote: »

I'd also be a bit suspicious of the story about being repossessed. If that's the case, then I don't think the mortgage company who hold a charge over the property would allow the property to be sold for an amount that won't clear the debt. I'd suspect this is more about trying to conceal assets from an ex partner and so they would want the £160k figure used in the contract and associated SDLT. It would be impossible to pay the correct SDLT as the forms would not have the true consideration on them. If the ex partner found out what was going on they are likely to expose this and leave your parents open to action by HMRC.

I'm thinking IVA or similar, but yes its not for repo purposes that's for sure (or atleast its not been repo'd yet)