Sub sale mortgage

Enniarg

I'm interested in a property being sold by an online estate agents. They have told me it's a sub sale less than 6months from original purchase which was purchased by a different section of the same company. So what I can see they would have bought it as a fast cash sale within 7 days type thing and now are reselling it at a higher price to turn profit. (Which I thought was illegal, however I have seen instances where they are the intermediate to sell on) . This company is not the registered owner in land registry it is still in previous owner name and also there is no EPC rating online (I know they can sort this part quick enough). 
I would need a small mortgage to buy but I've heard not many lenders will consider lending when it comes to sales less than 6 months from purchase. Has anyone got any experience with this scenario?

ACG

It can be done, but its not for all lenders. 

Its one of those things that is not always on published criteria, you need to check with the lender before applying or speak to a broker. Its not overly complicated, but could be a little time consuming - unless you get lucky. 

user1977

Even if a lender accepts the principle, I would be cautious about what the valuation will turn out to be, given the best evidence is probably going to be the last sale. Have the vendors actually done anything to increase the value of the property? 

housebuyer143

This must be common because new build builders do it, where they buy the house of the seller and immediately sell it as linked transaction. They don't seem to have issue with this 6 months rule. 
If they don't plan to update the land registry into their name and just sell it as a back to back sale then does that affect it?
I'm sure lenders have separate policy for back to back sale and purchase.

housebuyer143

user1977 said:

Even if a lender accepts the principle, I would be cautious about what the valuation will turn out to be, given the best evidence is probably going to be the last sale. Have the vendors actually done anything to increase the value of the property? 

These companies buy below market value, so it's not going to really impact the valuation and it probably won't be listed on land registry ever because they don't tend to add sales like this to the public forum. 

ACG

housebuyer143 said:

This must be common because new build builders do it, where they buy the house of the seller and immediately sell it as linked transaction. They don't seem to have issue with this 6 months rule. 
If they don't plan to update the land registry into their name and just sell it as a back to back sale then does that affect it?
I'm sure lenders have separate policy for back to back sale and purchase.

Natwest allow it with large national builders. 
I had a conversation with my account manager once with what constitutes as a large national builder. We agreed that a builder with 3 sites of 100, 200 and 500 homes and a history of developments in 3 counties going back 10 years would be enough to constitute a large national builder... the underwriter disagreed. 

In the end we argued it and basically said the aim of that rule was clearly to stop Dave the builder and his 3 houses on 1 plot.

user1977

housebuyer143 said:

This must be common because new build builders do it, where they buy the house of the seller and immediately sell it as linked transaction. They don't seem to have issue with this 6 months rule. 
If they don't plan to update the land registry into their name and just sell it as a back to back sale then does that affect it?
I'm sure lenders have separate policy for back to back sale and purchase.

The general policy is that (a) any seller who has been registered for less than six months and (b) any seller who isn't registered as the owner has to be reported to the lender (apart from exceptions, which include builder part-exchanges):

https://lendershandbook.ukfinance.org.uk/lenders-handbook/englandandwales/#C9130

user1977

housebuyer143 said:

user1977 said:

Even if a lender accepts the principle, I would be cautious about what the valuation will turn out to be, given the best evidence is probably going to be the last sale. Have the vendors actually done anything to increase the value of the property? 

These companies buy below market value, so it's not going to really impact the valuation and it probably won't be listed on land registry ever because they don't tend to add sales like this to the public forum. 

The price is still available even if not on the standard free listings, I'm not sure what sources the surveyors use but I'd guess they'll have more data generally available. And obviously the solicitors will see it as soon as they see the title.

In any event, presumably (in the absence of any other evidence) it was the best price that the previous vendor could get on the open market for a reasonably swift sale? This would be of interest to a mortgage lender who would want the same thing...

housebuyer143

user1977 said:

housebuyer143 said:

user1977 said:

Even if a lender accepts the principle, I would be cautious about what the valuation will turn out to be, given the best evidence is probably going to be the last sale. Have the vendors actually done anything to increase the value of the property? 

These companies buy below market value, so it's not going to really impact the valuation and it probably won't be listed on land registry ever because they don't tend to add sales like this to the public forum. 

The price is still available even if not on the standard free listings, I'm not sure what sources the surveyors use but I'd guess they'll have more data generally available. And obviously the solicitors will see it as soon as they see the title.

In any event, presumably (in the absence of any other evidence) it was the best price that the previous vendor could get on the open market for a reasonably swift sale? This would be of interest to a mortgage lender who would want the same thing...

It wouldn't be "on the open market" though. If it's a house buying company they buy them off distressed sellers, ridiculously lower than it's worth. 
I imagine any surveyor would see it for what it was and ignore it when making valuations as it's not a fair comparable. 

kingstreet

Here's Halifax criteria as an example of the usual mainstream approach;-

Sub-sales and back-to-back transactions are not acceptable.

A sub-sale occurs when a property is bought and then sold on within six months, i.e. the borrower is buying the property from someone who has themselves bought the property less than six months before. The date of registration at the Land Registry is how we determine the length of ownership.

This means that the current vendor must have owned the property for at least six months before we can accept an application to purchase that property.

A back-to-back transaction is a type of sub-sale where the intervening seller buys from the original seller and sells on to the borrower on the same day or within a few days. We also regard as sub-sales, cases where the seller acquires the freehold (or superior leasehold) title to the property, which they then immediately sell on to the borrower by the grant to them of a lease (or sub-lease).

The following cases are exceptions where it is acceptable for the property to be sold on within six months of acquisition by the seller.

Where sales are by:

• A personal representative of the registered proprietor; or
• An institutional mortgagee exercising its power of sale; or
• A receiver, trustee-in-bankruptcy or liquidator; or
• A developer or builder selling a property acquired under a part-exchange scheme.
• A registered Housing Provider (Housing Association) exercising a power of sale.

We will also accept inherited properties where the applicant is a beneficiary but has not owned the property for 6 months. Applications where the applicant is not a beneficiary of the inherited property and the beneficiary has owned the property for less than 6 months are not acceptable and must be declined. The conveyancer will be responsible for ensuring the application meets the acceptable criteria.

Applications which involve assignable contracts or irrevocable powers of attorney in favour of intervening sellers are not acceptable. Any other structure to the transaction which has a similar effect should be reported to us.

london21

Virgin money lent me on sub sale, owned for less than 6 months.

Not all lenders but some do.