Selling shared ownership in negative equity

HodK

Hello, I'm just wondering if anyone has any advice as it would be much appreciated.

My boyfriend bought a one bedroomed shared ownership flat in Wandsworth, London, in March 2017. He bought a 25% share of the total value of £525,000, and paid rent on the rest.

He was hoping to move back to Yorkshire and into my property and looked into selling. A local estate agent valued it at £525,000. A surveyor through the housing association he bought through have valued it at £425,000. The HA have to try to sell it first before you can pursue this privately. He is horrified and understands he would have to potentially pay £25,000 to get out of it, plus a fee of 1% of the sale value, plus fees. Is this correct? Has anyone experienced this? This seems completely unethical but it appears he is stuck if this is the case. Any advice would be appreciated!

lookstraightahead

House prices go down as well as up, is it on a new estate?

AdrianC

I'm not sure what you think is "unethical" here.

He bought a £131,250 asset which is now worth £106,250. There will be fees associated with selling it.

From the net amount he realises from that sale, he will need to clear his remaining mortgage. How much does he owe on that mortgage? Given that he only took it out 18 months ago, I suspect the answer is "just about every penny borrowed". But what equity did he provide on purchase?

What an EA "value" it at is irrelevant, because the shared ownership contract he agreed to when he purchased the flat will undoubtedly give the HA right of first refusal on sale. What does that contract say about valuation disputes?

PasturesNew

I bought a SO in ~1990/ Sold it in 1997 in negative equity still. I paid a cheque to settle the amount, which was about 5-10% I think, can't remember now.

The only "advantage" I had back then was that it was a lower value than your figures, but it worked out at about 2 months' gross pay.

For me, having 6-7 years or so "at one fixed address" was worth paying off the negative equity as I'd enjoyed that fixed security ....

If I were in your bf's position ... I'd be crying.

What the value is - and who values it - and any routes you have to challenge that valuation will be laid down in the buying documents. Buying SO it is exciting; trying to sell can be a nightmare for many because of these valuations....

Cakeguts

If it was a new property it has probably just dropped in value in the way that new properties do when they become 2nd hand.



It is never guaranteed that you will get as much or more for you property when you sell it as you paid for it because prices go down as well as up.


If your boyfriend wants to sell he will have to do whatever the HA needs him to do.

HodK

Thanks for the replies.
He put a 10% deposit down in the beginning. We were prepared for a drop in value but 100k seems pretty steep especially compared to the other properties available locally. HA do get first right of refusal - he's going to ring them to find out what they think of the valuation - it can be disputed if 3 other similar properties valuations can be evidenced to support your argument. Very little paid off the mortgage so limited equity there. Sounds like it will be an expensive payout and might just have to be a lesson learnt.

HodK

Yeah it's new and they're building more flats next door so I wonder if that's affected it.

csgohan4

HodK wrote: »

Thanks for the replies.
He put a 10% deposit down in the beginning. We were prepared for a drop in value but 100k seems pretty steep especially compared to the other properties available locally. HA do get first right of refusal - he's going to ring them to find out what they think of the valuation - it can be disputed if 3 other similar properties valuations can be evidenced to support your argument. Very little paid off the mortgage so limited equity there. Sounds like it will be an expensive payout and might just have to be a lesson learnt.

New flats, like a new car, once you use it, it drops it's value initially. House prices do go down as well as up and that is risk everyone takes when they buy, look at Northern Ireland as a prime example

AdrianC

HodK wrote: »

He put a 10% deposit down in the beginning.

So he borrowed £121k or so for this asset that's now worth £106k.


That's about £15k he'll need to find to clear the mortgage, not £25k.

HA do get first right of refusal - he's going to ring them to find out what they think of the valuation - it can be disputed if 3 other similar properties valuations can be evidenced to support your argument.

It's research time...

Very little paid off the mortgage so limited equity there. Sounds like it will be an expensive payout and might just have to be a lesson learnt.

Buying for the short term is never a wise move. Timing has been unfortunate here, sure, and plans change.

Crashy_Time

HodK wrote: »

Hello, I'm just wondering if anyone has any advice as it would be much appreciated.

My boyfriend bought a one bedroomed shared ownership flat in Wandsworth, London, in March 2017. He bought a 25% share of the total value of £525,000, and paid rent on the rest.

He was hoping to move back to Yorkshire and into my property and looked into selling. A local estate agent valued it at £525,000. A surveyor through the housing association he bought through have valued it at £425,000. The HA have to try to sell it first before you can pursue this privately. He is horrified and understands he would have to potentially pay £25,000 to get out of it, plus a fee of 1% of the sale value, plus fees. Is this correct? Has anyone experienced this? This seems completely unethical but it appears he is stuck if this is the case. Any advice would be appreciated!

SO and the Help The Bankers scheme are of course only designed for one reason, to keep the illusion of high prices so banks balance sheets can appear "above water". Scam from start to finish IMO.

Cakeguts

Crashy_Time wrote: »

SO and the Help The Bankers scheme are of course only designed for one reason, to keep the illusion of high prices so banks balance sheets can appear "above water". Scam from start to finish IMO.

Nothing to do with bankers and everything to do with votes.



It starts with some politician somewhere promising more housing. The problem is though that policitians are not builders. So builders build the houses. Once the builders have build the houses they have to sell them to someone so that they have enough money to buy more land or to employ people to build more houses.



Then along come the millenials with their sense of entitlement. This sense of entitlement includes wanting to live where they want to live even if they can't afford it. As this is all about votes shared ownership is introduced. So more people can live in an area where they don't earn enough to afford to buy a property. I would like to live in the Wentworth Estate near Virginia Water but I can't afford to. I would have to live somewhere cheaper. However I wouldn't demand shared ownership so that I could live there.



Us old people didn't have this attitude. If we couldn't afford to live in a particular area we moved lives and jobs to somewhere we could afford. There was no other choice.