Shared ownership simultaneous staircasing - who keeps the profit?

eddddy

csgohan4 wrote: »

Greed springs to mind, if you overprice the house/flat, expect it to rot on the market for years unsold and single figure viewings


Plenty of posts on here about 'Why my house is unsold' or 'why only x vewings'

I think its more likely that the OP misunderstood how staircasing works.

I suspect that they thought they could buy the remaining 75% for £165k (i.e. 75% of the £220k purchase price)

But in reality, it would cost them £300k (i.e. 75% of £400k current valuation).

NineDeuce

I dont see the point of doing the two simultaneously, unless you can feel you can get the buyer to pay over the market value for the price.

Also, wouldnt you have to pay higher legal fees for what would be 3 transactions - staircasing, sale, and buying new property....

00ec25

NineDeuce wrote: »

I dont see the point of doing the two simultaneously, unless you can feel you can get the buyer to pay over the market value for the price.

often there is no choice about the matter

the person who is looking to buy the property from the OP may not want a SO property and may be insisting on 100% ownership, in which case simultaneous staircase to 100% and sale is the norm

less commonly some HA when faced with an occupant who wants to sell do actually use that as an occasion to divest themselves of the property by "requiring" the occupant to staircase to 100% as part of the sale.

NineDeuce

00ec25 wrote: »

often there is no choice about the matter

the person who is looking to buy the property from the OP may not want a SO property and may be insisting on 100% ownership, in which case simultaneous staircase to 100% and sale is the norm

less commonly some HA when faced with an occupant who wants to sell do actually use that as an occasion to divest themselves of the property by "requiring" the occupant to staircase to 100% as part of the sale.

That isnt true. If the buyer wants 100% ownership straight off, then they can do that themselves. The buyer can buy whatever percentage they want providing they pass affordability checks.

The only instance in which the seller may do this is because they want to sell to a BTL landlord who is not permitted to buy via SO. But in this instance, it still wouldnt be to maximise profit. Why would any buyer pay substantially more for something that has only just been valued at a certain price?

yllop1101

NineDeuce wrote: »

That isnt true. If the buyer wants 100% ownership straight off, then they can do that themselves. The buyer can buy whatever percentage they want providing they pass affordability checks.

The only instance in which the seller may do this is because they want to sell to a BTL landlord who is not permitted to buy via SO. But in this instance, it still wouldnt be to maximise profit. Why would any buyer pay substantially more for something that has only just been valued at a certain price?

I'm not sure this is actually correct. When we bought our shared ownership property, the individuals owned 50% and the HA the other 50%. We really struggled to buy the full 100%, as the HA, understandably, felt that if we could afford a full house, we should go buy one and not reduce the shared ownership pool and it should go to someone who can't afford a full property. So we were assessed as being 'too affordable'

Our situation was swayed because we had been renting the property so it would have been the easiest transaction for the individuals selling, and we were eventually allowed to buy.

I think HA's differ by their preference to retain a percentage of ownership. Obviously they can profit if prices go up and they still own a share.

SeasidePanda

I think my main issue here is the actual staircasing:

My understanding is that I extend my mortgage to cover up the extra 75%, I don't actually need to physically pay for the 75%. Obviously I will need to add some extra deposit to allow for that to happen.

There is no greed here, but, understandably I think, I would like to know how much deposit I will have to put down on our new house so I can start looking in the right bracket.

Really frustratingly spent now over 2 hours waiting over two days to speak to HA and nobody is picking up the phone.

Thank you everyone for your help! I will update this thread once I have info from HA in case stumbles upon it in the future.

NineDeuce

yllop1101 wrote: »

I'm not sure this is actually correct. When we bought our shared ownership property, the individuals owned 50% and the HA the other 50%. We really struggled to buy the full 100%, as the HA, understandably, felt that if we could afford a full house, we should go buy one and not reduce the shared ownership pool and it should go to someone who can't afford a full property. So we were assessed as being 'too affordable'

Our situation was swayed because we had been renting the property so it would have been the easiest transaction for the individuals selling, and we were eventually allowed to buy.

I think HA's differ by their preference to retain a percentage of ownership. Obviously they can profit if prices go up and they still own a share.

That might be your specific association but it sounds like nonsense on their part. What would be to stop anybody from buying your 50% share and then immediately buying the rest?

Cakeguts

SeasidePanda wrote: »

I think my main issue here is the actual staircasing:

My understanding is that I extend my mortgage to cover up the extra 75%, I don't actually need to physically pay for the 75%. Obviously I will need to add some extra deposit to allow for that to happen.

There is no greed here, but, understandably I think, I would like to know how much deposit I will have to put down on our new house so I can start looking in the right bracket.

Really frustratingly spent now over 2 hours waiting over two days to speak to HA and nobody is picking up the phone.

Thank you everyone for your help! I will update this thread once I have info from HA in case stumbles upon it in the future.

Your mortgage has to be secured on the property. So the bank is not going to lend you the extra £300k or so against the £100k you own. A mortgage is used to buy something. The bank will lend you the extra money to buy the 75% only if you buy it.

Buying the other 75% is just going to cost you money it won't make you any. You will have to pay for the valuation fees of the 75% and the mortgage fees.


In approximate numbers. If the house sold to you was valued at £220000 and you bought 25% which is 1/4. That means you paid £56,250 for that 25% which consisted of your deposit whatever that was and the rest was made up from a mortgage. You say that the house is now worth around 400,000? So your 25% has gone up to £100,000. From this £100,000 you need to subtract the mortgage amount that you borrowed.

So taking the £100,000 that you now think is the value that you own you subtract the mortgage sum that you still owe and that gives you the approximate amount that you will have as a deposit on the next house. It will be around £50,000 depending on the size of your deposit and the amount you have paid off the mortgage.

You will not get anymore than this even if you staircase up to the full £100% because the housing association will sell you the 75% for the same amount as you will sell it to your buyer.

The answer to your question is that your next deposit will be of around £50,000. You don't need to ask the housing association you can work it out.

When you buy your next house you pay back the mortgage borrowed on this one and take out a new one for the next house.

Cakeguts

I am not sure if it is the % that is causing confusion here so I will try it in fractions.

You own 1/4 of a house. In that 1/4 is some of your money, the deposit and some of the banks money the mortgage. You have already paid for that 1/4.

If the whole house becomes more valuable you still only own 1/4. If you want to own the other 3/4s you either pay the housing association for it from savings or you borrow the money to pay for it.

The bank only lends money as a mortgage to buy the other 3/4s it won't just lend you money if you are not going to buy anything.

So the bank lends you the money to buy the other 3/4s and the bank money is secured on the 3/4s so that if you don't pay the mortgage the bank can sell the 3/4s and get its money back.

The housing association will get the 3/4s valued to find out what it is worth now and that is what you will pay for it. When you sell that 3/4s shortly after buying it you will get back what you paid for it. You will then repay the bank its money for that 3/4s plus the money that you borrowed to buy your 1/4. What is left over after all that money is paid back to the bank is the amount for your next deposit.


You won't get any more money by buying the other 3/4s you will lose money paying for the valuation fees and the mortgage fees and any conveyancing fees. The housing association will not pay these.

The simplest thing to do is to sell the 1/4 that you own to someone else who only wants to own 1/4.

saajan_12

SeasidePanda wrote: »

I think my main issue here is the actual staircasing:

My understanding is that I extend my mortgage to cover up the extra 75%, I don't actually need to physically pay for the 75%. Obviously I will need to add some extra deposit to allow for that to happen.

Whether you pay cash / mortgage is irrelevant.

1) To staircase upto 100% you / your lender need to pay the HA 75% of current value ie £300k.
2) When you sell, you'll get 100% of current value £400k.
3) With this, you have to pay off the mortgage on the same day, so if you extended your mortgage by £300k then atleast £300k will go to repaying the mortgage.
4) So net, you end up with £100k less the current mortgage balance, ie profit on 25% only.

The crucial point is you get the profit on 25%. You'll buy the rest 75% and sell it again at the current value.