Will it effect our house purchase if the house was previously sold undervalue?

Thrugelmir

Waller97 said:

user1977 said:

Waller97 said:

user1977 said:

How long ago did they buy? If less than six months then that's typically an issue for mortgage lenders.

Yes I was worried about this but mortgage lenders are aware and are proceeding with application so I would assume they aren’t bothered by this?

So when was it?

The seller completed on the house in March and we had our offer accepted in April. 

Something appears to be amiss. 

Gavin83

Waller97 said:

We are first time buyers in the conveyancing process of buying a no chain home. There were a couple of red flags with the seller of the property and how he came to obtain the property but we made the decision to move forward and get more information on this.

Our understanding as presented by the EA was that the seller bought the home in a cash purchase from his uncle as his uncle needed money for care purposes. He then put the house back up for sale the same week he completed to make some £££. (We flagged this to our solicitor so they are aware of all the details). It later emerged that the seller is part of a property development company although EA still adamant that the story of buying off his uncle is correct.

our solicitor has sent enquiries and has asked for a declaration from the seller explaining
a) why he is selling so quickly after buying 
b) whether he bought the home at an undervalue 
c) whether transaction was at arms length.

(I’m assuming the implication is he may have taken advantage of a vulnerable person to get the house cheap)

Can this in any way impact our house purchase? If there were any legality issues then I wouldn’t be upset to lose the house but I’d like to be prepared and our solicitors aren’t great with communication so thought I would see if anyone else has any experience like this?

TIA

Do you know how much he paid for the property and how much he's selling it for?

saajan_12

We had a similar question on a house sale in my extended family, where a son was gifted a house by his parents a couple of years before the son moved and sold the gifted property. Parents were perfectly solvent, plenty of other assets and no creditors looking for money, just wanted to help son. Of course the buyers didn't know that and considered this the same as OP's situation ie a sale at nil/undervalue within the last 6 years. 

Ultimately it was solved quite easily between the solicitors by 
- credit / solvency check run on the mother (gifter)
- statement by mother confirming the gift was made outright, with no creditors or claims on the property
- indemnity insurance - in the event that a creditor did emerge and try to void the property sale from son to buyer, it would pay upto the full value of the property to the buyer. Cost of the policy was approx 0.1% of the property value (ie £500 for a £500k property, though not sure how that would scale up / down). 

FreeBear

Waller97 said: It later emerged that the seller is part of a property development company although EA still adamant that the story of buying off his uncle is correct.

If you do go ahead, please, get a full & thorough survey done - If he bought to "do up" and then flip, quite often corners are cut, and it is only a thin veneer hiding all sorts of questionable work. Whilst a surveyor wouldn't be able to poke holes in stuff, he should be able to spot the signs of a Bob the Builder at work..

A house a few doors down from here went through the hands of a flipper (he got his fingers burnt on that one). The current owner is slowly uncovering all sorts of bodges..

theoretica

If he completed in March, has the land registry updated?  If not, there may be challenges getting your update requested until his has gone through.

Ath_Wat

FreeBear said:

Waller97 said: It later emerged that the seller is part of a property development company although EA still adamant that the story of buying off his uncle is correct.

If you do go ahead, please, get a full & thorough survey done - If he bought to "do up" and then flip, quite often corners are cut, and it is only a thin veneer hiding all sorts of questionable work. Whilst a surveyor wouldn't be able to poke holes in stuff, he should be able to spot the signs of a Bob the Builder at work..

A house a few doors down from here went through the hands of a flipper (he got his fingers burnt on that one). The current owner is slowly uncovering all sorts of bodges..

He couldn't have done much doing up between buying it in March and accepting an offer in April.

Ath_Wat

user1977 said:

gingercordial said:

Could there be a risk that the nephew had power of attorney over the uncle (if the uncle is in care), and has abused that power to put through the sale to himself to the uncle's detriment?  So similar to eddddy's first example but done to benefit the nephew not the uncle.  Likewise I would think if so there's a danger the first sale could be voided, and hence the second sale could not happen.

It would be a valid claim against the nephew, but I don't think that gives anybody the right to unravel a transaction with a third party (acting in good faith), otherwise lots of transactions would never get done.

Unravel, no, but the person you are responding to is suggesting that it might not get as far as the second sale happening.

GDB2222

Waller97 said:

user1977 said:

How long ago did they buy? If less than six months then that's typically an issue for mortgage lenders.

Yes I was worried about this but mortgage lenders are aware and are proceeding with application so I would assume they aren’t bothered by this?

They have your deposit, and you are personally liable for any shortfall, so that helps a bit. 

user1977

Ath_Wat said:

user1977 said:

gingercordial said:

Could there be a risk that the nephew had power of attorney over the uncle (if the uncle is in care), and has abused that power to put through the sale to himself to the uncle's detriment?  So similar to eddddy's first example but done to benefit the nephew not the uncle.  Likewise I would think if so there's a danger the first sale could be voided, and hence the second sale could not happen.

It would be a valid claim against the nephew, but I don't think that gives anybody the right to unravel a transaction with a third party (acting in good faith), otherwise lots of transactions would never get done.

Unravel, no, but the person you are responding to is suggesting that it might not get as far as the second sale happening.

No, they're talking about it being voided ie after it completes. 

Ath_Wat

user1977 said:

Ath_Wat said:

user1977 said:

gingercordial said:

Could there be a risk that the nephew had power of attorney over the uncle (if the uncle is in care), and has abused that power to put through the sale to himself to the uncle's detriment?  So similar to eddddy's first example but done to benefit the nephew not the uncle.  Likewise I would think if so there's a danger the first sale could be voided, and hence the second sale could not happen.

It would be a valid claim against the nephew, but I don't think that gives anybody the right to unravel a transaction with a third party (acting in good faith), otherwise lots of transactions would never get done.

Unravel, no, but the person you are responding to is suggesting that it might not get as far as the second sale happening.

No, they're talking about it being voided ie after it completes. 

"  Likewise I would think if so there's a danger the first sale could be voided, and hence the second sale could not happen."