Incorrectly identified as social housing

distantsun23

We are a couple of months into the process of selling our flat (purpose-built block, 15-20 years old), and today our EA has called to say our buyer’s solicitor has said our building is primarily social housing, and on this basis, the buyer (BTL investor) will not get their mortgage offer. 

The building has no social housing in it at all (although there is in other buildings on the development). We have confirmed this, got confirmation from the managing agent, and advised who our current mortgage is with (on the off chance the buyer is with the same bank).

We have our solicitor (who is good, and quick to respond and deal with things) on the case to see where the buyer’s solicitor has gotten this from (we understand it may be from the mortgage surveyor) and hopefully clear things up with whatever paperwork they need, but does anyone have experience of this or a similar situation? Were you able to get the lender to reevaluate (using the correct information), or get an offer with an alternate lender?

Appreciate any similar experiences while we try not to stress too much about this!

K_S

@distantsun23 Do you know when they applied for a mortgage or what bit of conveyancing triggered this bit of news? Usually something like this would come up at valuation which is usually no later than a few weeks after a full mortgage application has been submitted.

With a BTL purchase of a flat on an estate, there are quite a few different criteria that come into play when it comes to whether the property is suitable for the specific lender that's been used. It's hard to speculate on what exactly the issue is, especially given that it's come up a few months into the purchase.

Depending on the lender, there can be subjective/objective social housing criteria like "meaningful level of private ownership within the estate", "at least 40/%/50%/80% private ownership", "freeholder cannot be LA" , "majority of homes in the area need to be in private ownership", etc.

Given that the flat is mortgageable with a mainstream resi lender, there are likely to be alternate lending options in the market but depending  on the buyer's details, how long ago they applied for the mortgage (which is when the rate would have been secured), etc. they may or may not be willing to put in a new application or they might not have other lender options.

distantsun23 said:

We are a couple of months into the process of selling our flat (purpose-built block, 15-20 years old), and today our EA has called to say our buyer’s solicitor has said our building is primarily social housing, and on this basis, the buyer (BTL investor) will not get their mortgage offer. 

The building has no social housing in it at all (although there is in other buildings on the development). We have confirmed this, got confirmation from the managing agent, and advised who our current mortgage is with (on the off chance the buyer is with the same bank).

We have our solicitor (who is good, and quick to respond and deal with things) on the case to see where the buyer’s solicitor has gotten this from (we understand it may be from the mortgage surveyor) and hopefully clear things up with whatever paperwork they need, but does anyone have experience of this or a similar situation? Were you able to get the lender to reevaluate (using the correct information), or get an offer with an alternate lender?

Appreciate any similar experiences while we try not to stress too much about this!

distantsun23

K_S said:

@distantsun23 Do you know when they applied for a mortgage or what bit of conveyancing triggered this bit of news? Usually something like this would come up at valuation which is usually no later than a few weeks after a full mortgage application has been submitted.

With a BTL purchase of a flat on an estate, there are quite a few different criteria that come into play when it comes to whether the property is suitable for the specific lender that's been used. It's hard to speculate on what exactly the issue is, especially given that it's come up a few months into the purchase.

Depending on the lender, there can be subjective/objective social housing criteria like "meaningful level of private ownership within the estate", "at least 40/%/50%/80% private ownership", "freeholder cannot be LA" , "majority of homes in the area need to be in private ownership", etc.

Thanks so much for the explanation of the criteria. Unsure what exactly has triggered it - the survey was done a few weeks back, and I’m not sue if the mortgage offer was given and is now being rescinded (or there is a threat it will be so), or if the offer was only given (or not, as it seems) today. 

Thoughts are that the mortgage surveyor has raised something (apparently called our EA when doing the survey and asked if the block was LA/ex-LA), or that the issue is with our freeholder (who is a social housing provider, though not LA, and our building has no social housing). The freehold has changed hands since we bought (5 and a half years ago), but only from one social housing provider to another! There certainly is social housing on the estate (small estate - 4/5 blocks of flats, around 25-30 in each, plus maybe 25 houses. All the houses are social housing, unsure about the flats), but I don’t believe anything significant has changed since we bought (we had cladding issues until recently), and this was never raised as an issue with our purchase.

Hopefully we can get some clarification tomorrow, and either resolve the issue with the current lender (if something has been incorrectly advised by the solicitors), or else encourage the buyer to look with another lender, if we can find out what criteria the current one is unhappy with.

K_S

@distantsun23 Unfortunately you can't really compare across lenders as criteria can be materially different and the applicant's individual circumstances can also come into play. 

Based on what you've said, it could be a number of things to be honest - a social housing provider being the freeholder on the estate, level of social housing on the estate or surrounding areas, etc.

If I had to guess I'd say it's likely to be the proportion of social housing on the estate. If so, then the valuer (a third party surveyor firm) would have given a nil-valuation to the lender at which point the application comes to a halt. It's important to understand that all this means is that the property is not a suitable BTL security for that specific lender. It doesn't necessarily mean that the valuation outcome would be the same with another lender but it could well be depending on the specifics.

On top of all that, if your buyer applied for a mortgage prior to the mini-budget, they may have secured a low rate (and much kinder stress tests) and to apply with a new lender now might mean much higher rates and failing stress tests.

I hope the transaction gets back on track, good luck!

user1977

It will be from comments by the surveyor - solicitors aren't expected to know or advise about this sort of thing.

distantsun23

user1977 said:

It will be from comments by the surveyor - solicitors aren't expected to know or advise about this sort of thing.

If that is the case, then we have written confirmation now that there is no social housing in the block, so fingers crossed they may be able to review what the surveyor has said. I wonder also if a lack a recent transactions may be causing an issue, as no one has been able to sell for 

distantsun23

Oh dear, hit the post button too early! No one has been able to sell for a few years due to cladding issues (now resolved), but that surely must be a common enough issue these days.

Thanks for your input, much appreciated!

silvercar

user1977 said:

It will be from comments by the surveyor - solicitors aren't expected to know or advise about this sort of thing.

In which case, it would be worth getting in touch with the surveyor, so he can correct his report.

user1977

silvercar said:

user1977 said:

It will be from comments by the surveyor - solicitors aren't expected to know or advise about this sort of thing.

In which case, it would be worth getting in touch with the surveyor, so he can correct his report.

Or rather, suggesting to the buyer that they ask their lender to get in touch with their surveyor...

dimbo61

Lots of buyers and sellers now looking for excuses to pull out of buying or selling a property.
The whole property market has changed so much in 6 months 
Many BTL landlords selling rather than buying