Buyers wants separate private arrangement for part of sale value

seeking786

Hi,
Has anyone come across anything like this before? Any suggestions?
Selling a property that is in probate at the moment. Probate valuation was 460-475. Accepted an offer of 445.
The buyer has now done their valuation (BTL mortgage) and their lender valued it at 410 and given them a mortgage offer/decision in principle based on this. The agent said it was common for banks to undervalue in the case of BTL. I said I could only go down to 435 since we were already well below the Probate valuation (I am the sole beneficiary - thought it would be easier to sell while in probate instead of transferring to me first and then selling). I will try to re-negotiate commission with estate agent to soften the blow.
Buyer agreed to the 435 but said they wanted the contracts to still say "410" and that they'd do the extra 25 as a 'separate private arrangement'. The reason they gave is that they were worried that if the lender saw on the contract they were buying it at a price much over their valuation that the lender might be worried about 'negative equity'.
Surely this isn't the case? As long as the loan to 'value' ratio is unchanged (i.e the amount of money the lender is going to lend won't be any different), surely the lender doesn't care if the price paid is over their understanding of the 'value' because it's the buyers 'extra' money that is at risk and not the lenders. This 'separate arrangement' just feels like a faff for me to deal with and worry about (i.e. what if we've exchanged and then suddenly there's a 'problem' with coming up with the 25K). Is this something the solicitors would deal with? It just sounds like extra unnecessary work for them (and solicitors fees for me).

davidmcn

Even if you wanted to overlook being party to mortgage and/or tax fraud...what happens if the extra £25k doesn't magically turn up in your account on completion day? You've signed a contract saying you need to accept the lower amount...

pinklady21

What does your solicitor say about it? Suspect they would be unwilling to allow you to do this - if nothing else the buyer seems to be trying to save some dosh on the Stamp Duty. Let us know how you get on though!

PasturesNew

They are wrong in what they think. The lender's more interested if they believe the buyer is putting more of their own money at risk.

This is technically a mortgage fraud too - which you shouldn't get yourself involved in.

Somebody needs to explain to them it's not possible and that declaring their full cash value invested in the house makes them look "a better bet" to a lender.

lincroft1710

Any deviation from the norm in property transaction is usually bad news. One transaction at £435K or you will re-market the house.

Smodlet

seeking786 wrote: »

As long as the loan to 'value' ratio is unchanged (i.e the amount of money the lender is going to lend won't be any different), surely the lender doesn't care if the price paid is over their understanding of the 'value' because it's the buyers 'extra' money that is at risk and not the lenders. This 'separate arrangement' just feels like a faff for me to deal with and worry about (i.e. what if we've exchanged and then suddenly there's a 'problem' with coming up with the 25K). Is this something the solicitors would deal with? It just sounds like extra unnecessary work for them (and solicitors fees for me).

The reason the lender would care is, if their borrower has to come up with £25k/whatever on top of what they are prepared to lend, where is it coming from? Are they taking out another loan to fund the £25k? This could adversely affect the borrower's (your buyer's) ability to repay their mortgage. Not rocket science. Not everyone is as privileged as you obviously are to have a £400+k house handed to them on a plate.

kingstreet

seeking786 wrote: »

The reason they gave is that they were worried that if the lender saw on the contract they were buying it at a price much over their valuation that the lender might be worried about 'negative equity'.

Absolute twaddle.

They are borrowing no more than 75% or perhaps 80% of the valuation, not the purchase price. If they pay more, it affects only them.

davidmcn

Smodlet wrote: »

Are they taking out another loan to fund the £25k?

Or taking it from a source which wouldn't pass their solicitors' money-laundering checks?

kingstreet

Has the surveyor valued the property at £410k, or is the rental income assessment equal only to a £410k value?

Have you seen a copy of the valuation report?

You might call me cynical, but if you know the right lender to go to, you might convince a niaive seller to accept a lower amount using the above.

You need to know the estimated rental income, the max LTV and the lenders rent v interest calculation.

DaftyDuck

Smodlet wrote: »

...... Not everyone is as privileged as you obviously are to have a £400+k house handed to them on a plate.....

... presumably through the death of a loved one.... Not exactly privileged there, I'd say.

G_M

Tell them you'll agree, but only if they give you, in cleared funds, the £25K before Exchange of Contracts.