House value with section 157

alarge

Hi all

In a bit of a pickle, we are (were) close to completing on purchasing our first home (3 bed semi detached ex council house). It has the usual section 157 meaning that only people from Devon are able to buy the property. We didn't find out about the convenance until our solicitors informed us that we needed to give a letter saying I had worked / lived here for the last 3 years. Didn't think much more about it, other than it seemed to have added nearly a month to process with all the letters going between the solicitors and council.

Anyway we agreed with the seller (not using an estate agent) a fee of £185000 which seemed reasonable to both parties. About 6 years ago the property sold to the current owner for £178000. The mortgage value agreed with a price of 185000, but put a [N] next to are their any restrictions on the property that their aware of.

Now our solicitor has had to inform the mortgage company of said restriction, they have turned around and said they wouldn't be willing to provide it unless the council agreed that should they need to repossess from us and sell that the restriction would be waived for them. The council have written a letter to say that whilst they can't guarantee it, they would consider it if it did happen.

Just waiting to hear back from the mortgage company to see if they are happy with that - who knows, probably not and back to the drawing board.

What I would like to know is that are ex council houses with these restrictions normally cheaper and if the valuer for the mortgage company valued it at £185000 without restrictions, what would you expect it to be worth. I know its a question for an estate agent really and I do know one that I can ask, but if there is a rough figure / percentage then we know if we stand to lose out when we sell in the future!

Now I have written this and re-read it I realise that perhaps alarm bells should have been ringing earlier, still its all a learning curve!

Thanks

eddddy

Yes - houses with those types are restrictions are usually cheaper.

That's the purpose of the restriction. It's to stop the property prices being inflated by, say, wealthy Londoners who buy them up as second homes.

As you say, you probably need to talk to a local EA.

alarge

We did get one out to value it for our peace of mind. Will be calling them in the morning to mention this and see if it changes things or if they already took that in to account. Also just found the number for the surveyor acting on behalf of the mortgage company so they will be getting a call too!

Hoploz

The value already probably takes the restriction into account if it's fairly common in your area.

However the lender should have been made aware at the outset of this restriction. You've done well to get the reply from the council regarding option to remove it, I'm amazed you achieved that tbh!

So it's possible the lender could value it lower. This might not cause a huge problem depending on your LTV ratio, eg they value it lower so the loan is 63% of the value rather than an original 61% for example. (you'll have to work on your own figures) Worst case scenario would be they refuse to lend and you'd have to reapply with another company for a new mortgage. But if that were the case they'd probably have stated that as soon as the problem was raised.

Fingers crossed

alarge

A couple of estate agents (including the one who valued it on the sellers behalf) have said it could be between 5 and 10% less. Her estate agent even went as far as to say they were not made aware of any restrictions when they valued the property.

However our estate agent we got to value the property said it wouldn't have that much effect. It's a small village and there are only 4 ex council estate properties (all in a row). Surveyor for mortgage company said that we need to go back to the mortgage company and ask them about the valuation. So I guess that's where we go next