Making Offer for a Shared Ownership Scheme

bombata

Hello I hope somebody can give me some advice.

I am 24. Earn about 27k with around 6k commission per year and I have a desposit of about 30k. I am planning to make an offer on 30% share of 82k in a shared ownership flat valued at 275 000 k.

They are looking for somebody to move in end of February which I am able to do.

I am viewing the flat tomorrow, and would like to put in an offer as soon as possible. I have already got preliminary mortgage offers. I calculated my outgoings will be about 900 Pounds a month which I think I can afford when I take minimum 1650 Pounds home every month. And I am planning to sublet the second room to my friend which will help with the payments.

How hard is it to get an offer accepted. I am not a keyworker, but a first time buyer and have no credit history. What do you need to give the housing association when you make and offer?

Maybe somebody who recently purchased shared ownership flat can give me some advice on what documentation was required, if they had a lot of competitions for the flats and just general things I have to look out for!

Thank you

SerenaGoode

A few points:

Shared ownership sometimes seems a better deal than it is - you could end up paying more for less than if you saved a bit longer and bought a cheap property. I'm sceptical immediately because of the £275K price. How many bedrooms is it and where is it. That sounds a lot in theory. Is it a new-build? Because whatever happens to the rest of the market, new-build apartments have already been dropping in price. What happens to your share if the price falls?

In a lot of places around the country, new apartments are also wildly overpriced compared to older style properties. I know several areas where the apartments go for more than a much bigger two or three bedroom house.

The fact that they are a housing association doesn't guarantee that you won't get overcharged for this. I know that shared ownership can work for some people, so I'm not saying it's definitely a bad idea, just raising a few doubts that immediately came into my mind when I read your post.

bombata

Yes its a new build, but its in east London, so prices I guess prices are high.
Its a 2 bed room flat, and 2 beds in that postcode start at about 170-180k but then they are excouncil flats.

SerenaGoode

bombata wrote: »

Yes its a new build, but its in east London, so prices I guess prices are high.
Its a 2 bed room flat, and 2 beds in that postcode start at about 170-180k but then they are excouncil flats.

I'm in North London so know London prices pretty well. I'd be extremely reluctant to spend £275K on a 2-bed in East London, Olympics or no Olympics. Around me there are some decent 2-bed garden flats for less than that, and you can buy an OK 2- or 3- bed house for £300K - and while lots of ex-council flats are crap, some of them are perfectly good, and I don't see that a £100K gap can possibly make sense. remember these places are new now but will deteriorate over time and end up being percieved with the same ense of snobbery that ex-La flats are perceived now.

Sorry to be discouraging but I wouldn't touch it with a bargepole if I were you. I think you will have far better opportunities over the next few years if you are patient.

bombata

At the moment I am paying 1200pounds rent a month for a 2 bedroom flat in Bethnal Green.

If I buy that 30% share in that flat I would only pay about 900 saving me 300pounds a month. The idea was just to buy 30% and then buy more when the prices have fallen.

I guess if you go outside zone 2 you get better bargains.

SerenaGoode

bombata wrote: »

At the moment I am paying 1200pounds rent a month for a 2 bedroom flat in Bethnal Green.

If I buy that 30% share in that flat I would only pay about 900 saving me 300pounds a month. The idea was just to buy 30% and then buy more when the prices have fallen.

I guess if you go outside zone 2 you get better bargains.

So if you save £300 a month in the short term and lose £20K over the next few years, will you think you made a smart decision? Does the amount you have to pay to up the %age ownership fall in proportion to house prices in the area, and who is the arbiter of that decision? And in any case, if the original price is outrageously high, as I would assert that it is, what good does it do you long term if you can buy more? You have still paid way over the odds and can't escape from that property without reconciling that overpayment at some point. If the HA values the place at £220K but you can't sell for more than £180K who covers the gap?

£900 a month is shockingly expensive for £85K worth of debt. You could pay interest on a £200K+ mortgage for that, and the £1200 you're now paying would pay a repayment mortgage on something far better than some new-build nightmare.

And no, this isn't a zone 2 issue. You can't get an ex-LA flat in my area for under £200K. Don't delude yourself by rejecting sincere advice.

There is a small possibility that this is a better deal than I suspect. But seriously, £275K for a new-build flat (regardless of the shared ownership) is nuts. These are the places that are most vulnerable to price falls, and it depresses me to see people messing up their futures. Think hard, find somewhere cheaper to rent, and be patient. You're young and this is possibly the stupidest moment possible to enter the housing market, especially on an illusory share. And if you insist on messing up your financial future, good luck and I hope I'm wrong.

chappers

SerenaGoode wrote: »

A few points:

I'm sceptical immediately because of the £275K price. How many bedrooms is it and where is it. That sounds a lot in theory.


What happens to your share if the price falls?

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Sceptical why all depends where it is if the price falls their share will be worth a corresponding amount less but all they have to do is hold on until prices recover again, this is also going to be their home.
Its strange i was just talking to my father-in -law the other week about when he bought his first house it was all about having enough room for your family ,a decent garden for the kids and the house being suitable for your lifestyle. Now everyone treats their home as a stack of pound notes

SerenaGoode

chappers wrote: »

Sceptical why all depends where it is if the price falls their share will be worth a corresponding amount less but all they have to do is hold on until prices recover again, this is also going to be their home.
Its strange i was just talking to my father-in -law the other week about when he bought his first house it was all about having enough room for your family ,a decent garden for the kids and the house being suitable for your lifestyle. Now everyone treats their home as a stack of pound notes

On the contrary, I think houses should be treated as a home by everyone in an ideal world. but in this less than ideal world we have a property bubble, which is heavily focussed in new-builds.

Shared ownership deals tend to work severely to the disadvantage of the owner if prices fall. And also, buying a share of a property is in the first place a sign of a stupid bubble which means that people are so desperate to buy that they will make unwise decisions.

You could wait a hell of a long time for prices on these kinds of places to recover. I am of the generation that treated houses as a home, but I am also of the generation that saw prices crash on these kinds of properties in the 90s.

gabyjane

Hi we have recently bought a new build town house 2 beds big garden garage drive etc..lovely £150k..we have purchased 40%..we had no chance to make an offer as there was such a long waiting list and as we have been waiting 7 years! we snapped it up, best move for us as far as were concerned. They are all now taken and we wouldn't get anything as near as nice for the money.
I have to agree with the above poster in that some people see houses as money money money..we dont we are sick of having to move due to this that and the other, i am self employed and felt so unsettled, really wanted to buy a house and yes we have been patient and waited, my family said 3 years ago wait and wait well we have and as far as i'm concerned we could have paid over £20k off this place minimum if we had bought buy hey that's life isn't it!
If you like the flat and can afford it go for it, if you are going to be happier buying than renting then that's you like us im so much happier!! don't give a stuff what people think about new builds or S/O!!
Oh one last thing we can only really afford to buy the whole house if prices drop which we knew doesnt really matter too much, the house was valued after we moved in and came up at £153k so not bad profit in a few weeks!!

SerenaGoode

gabyjane wrote: »

Hi we have recently bought a new build town house 2 beds big garden garage drive etc..lovely £150k..we have purchased 40%..we had no chance to make an offer as there was such a long waiting list and as we have been waiting 7 years! we snapped it up, best move for us as far as were concerned. They are all now taken and we wouldn't get anything as near as nice for the money.
I have to agree with the above poster in that some people see houses as money money money..we dont we are sick of having to move due to this that and the other, i am self employed and felt so unsettled, really wanted to buy a house and yes we have been patient and waited, my family said 3 years ago wait and wait well we have and as far as i'm concerned we could have paid over £20k off this place minimum if we had bought buy hey that's life isn't it!
If you like the flat and can afford it go for it, if you are going to be happier buying than renting then that's you like us im so much happier!! don't give a stuff what people think about new builds or S/O!!
Oh one last thing we can only really afford to buy the whole house if prices drop which we knew doesnt really matter too much, the house was valued after we moved in and came up at £153k so not bad profit in a few weeks!!

Good for you. FWIW I'm far less sceptical of new-build houses than apartments.

In both cases one big question is what happens to the outstanding value if the valuation falls. In at least one S/O sceme I looked at, if you bought £100K of a £250K house then the price fell £50K you'd still owe the original £150K. In that case it's a big risk.

Thinking about these things isn't just about money. It's also about your future happiness. You may be very happy now to have a home you part-own, but if it is going to cause trouble down the line, it;s worth wrrying about now,

chappers

SerenaGoode wrote: »

Shared ownership deals tend to work severely to the disadvantage of the owner if prices fall. And also, buying a share of a property is in the first place a sign of a stupid bubble which means that people are so desperate to buy that they will make unwise decisions.

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People are desperate to get on the housing ladder but shared ownership is surely making a sensible decision only borrowing what you can afford. Making unwise decisions is to just say right buy the lot and lie on a self cert.

Do you honestly believe that the prices of any property are going to fall so significantly that they aren't going to recover over the lifetime of a mortgage.Even usingyour own reasoning look at what has happened to house prices since the 90's crash.
Buying part of a house has no more risk attached to it than buying the whole thing if you bought all of your 250K place and it dropped by 50K you would still have to pay the 250K.
I find it quite alarming that we are hearing of everything from small rises to 45% devaluation over the next 5years. As I said on another thread a lot of this is stirred up by the financial media sensationalizing, unfortunately the housing market and the performance of the economy is partly run on sentiment, confidence primarily and so some times these reports of doom and gloom have a habit of becoming self prophesising.
Nobody knows for sure how hard the credit crunch/crash/recession is going to hit, if at all and the wise will take stock and reign in their credit. But putting your life on hold is daft, if you are buying your primary home then treat it as such and the long term benefits will realise themselves. Buying for short term investment well thats a different story altogether.