Selling House Over Market Value

time-4-a-new-start

Hi
I'm looking at selling my house as part of a swap for a new house. Sounds simple, but let me give some details:
1. My current house is in negative equity
2. I am buying a new build house and as part of the deal the seller is buying my house.  They wont be using a mortgage to buy it, rather take my house as equity off the purchase price 
3. The proposal is for me to buy the new house at the sale price and get a new mortgage for that value (already an offer in place)
4. The seller will buy my house for the current mortgage value (approx £40k over the market value). As above, they wont be using a mortgage to buy it, rather buy using the funds from the sale of their house.

My main question is can you sell a house for a price above the market value? As there isn't a mortgage I think you can sell for whatever price a buyer is willing to pay? Similar to you selling a house under value or for £1 for example. 

Selling my house at the mortgage value allows me to move away from the negative equity on it.  We did look at porting the mortgage and keeping my house, but neither options were viable. The proposed offer allows us to move on and the seller to sell a house that has been on the market a while.

Would really value you input and advice on this. Thanks 

[Deleted User]

You can sell a house for whatever you want to.  You would question the sanity of someone paying more than its worth for it thought.  I would assume by paying 40k extra for your house they are able to sell you the new build for more than 40k what that is worth.
They will still be making a profit from the deal

time-4-a-new-start

Hi 
Thanks for the comments. Yes the reason the seller is paying more for my house is it was negotiated as part of me buying theirs.  It was on the market for a while, so I am happy to give them their asking price as it includes overpaying on my house to let me clear that mortgage

Ozzuk

I would suggest a little caution - make sure you get a solid valuation on the one you are buying as you don't want to compound your negative equity problem (i.e. 40k from old house becomes 60k on new house).  

davidmcn

Ozzuk said:

I would suggest a little caution - make sure you get a solid valuation on the one you are buying as you don't want to compound your negative equity problem (i.e. 40k from old house becomes 60k on new house).  

It's not just the valuation, it's making sure the lender is happy with the overall picture. You can't kid on that the overpayment on the property being sold isn't connected to what's being paid for the new house, it will be deemed to form part of the consideration. Lenders are much hotter on "incentives" than they used to be.

warby68

My only doubt is whether you have a firm mortgage offer that reflects the lender's valuation for the property you are buying if this is where the £40k is being absorbed.
Also you don't mention a deposit - presumably you have savings for this? 
If you don't have savings and numbers are being juggled creatively to show you had some equity in your property to act as deposit then I think this is where it would get a little risky/dodgy.

time-4-a-new-start

Ozzuk said:

I would suggest a little caution - make sure you get a solid valuation on the one you are buying as you don't want to compound your negative equity problem (i.e. 40k from old house becomes 60k on new house).  

Thanks. Yes the new house we are buying has been properly valued by both the estate agent and also the new mortgage company. So confident that value is fine

time-4-a-new-start

warby68 said:

My only doubt is whether you have a firm mortgage offer that reflects the lender's valuation for the property you are buying if this is where the £40k is being absorbed.
Also you don't mention a deposit - presumably you have savings for this? 
If you don't have savings and numbers are being juggled creatively to show you had some equity in your property to act as deposit then I think this is where it would get a little risky/dodgy.

Hi Yes we have a firm mortgage offer in place for the value the agreed value.

Yes we have savings for the new deposit. We had looked at using them to offset the negative equity but wouldnt then have enough to cover the new deposit. So have kept the deposit seperate.

The new mortgage provider is aware of the current house we have and that its being sold (was factored into the ability to repay the new mortgage, outgoings etc)

lisyloo

I am confused how this works. You need to clear the mortgage and find the balance.
if there’s a genuine £40k discount here then that wipes out your negative equity but still leave you 10% mortgage. Does it add up?
could you put figures up so we can check?

time-4-a-new-start

Hi
Yes
Purchase price of new house - £370k
Deposit for new mortgage - 10%
Current mortgage/agreed purchase price of existing house - £186k
Existing house current valuation - £146k

So mortgage in place for 370k and deposit there. 
The deal would be we pay £370k (mortgage and deposit) to get the new house. Seller then pays £186k for my house.  I clear that mortgage and he takes ownership of that.

davidmcn

The problem is that lenders use the lower of the valuation and the price you're paying for the purposes of their loan to value calculation. And in reality the price you're paying for the new place is £370k minus the £40k overpayment (though there might be some leeway given that there are "normal" incentives provided by builders), so you could be looking at a maximum mortgage of 90% of £330k.