Affordable housing scheme - any thoughts?

Martin_Edwards

My wife & I are 1st time buyers busily looking for a house to buy with a view to stop there & grown roots so to speak. One property that has caught our eye is under an Affordable Housing Scheme (AHS). I have asked the estate agent what this means & have been informed that for this particular scheme you own the propery out-right, but only have to pay 85% of the current market value, This saving must be passed onto the next buyer of the property if we sold it & is legally binding.

Now for the maths bit, the property is on the market in this AHS at £175,000, therefore implying its current 100% value would be £206,000 which is far & beyond its value (there is a nicer, almost identical house a few doors up the same street going for £185,000 which does seem to be a truer reflection of the value). Taking that figure into account, 85% of £185k would be £157,250.

I understand that it is ultimatley up to the vendor which price the house is sold for & obviously they would try & get the most value for it. This properties' vendor has relocated & the house is currently vacant. This vendor bought the house under the scheme for £148,500 in October 2004.
To make an attractive & (in my view fair bid) I rang the estate agent, and mentioned my feeling on the 85% factor and made an opening bid of £165,000 (which would imply a 100% market price of £194k), I realise the estate agents job is to sell the house for as much as poss, however I was suprised when she mentioned that she was sure this bid would be almost laughed at by the vendor. I insisted that the bid is made as I am still sure it is realistic.

What is the point of having the AHS if it is not followed & what is my position legally - surely I can prove the offer is over 85% of the current market value. The obvious danger is that if we pay too much over the 85% value then will we be able to re-coup this on re-sale of the property years down the line.
We are starting to think we'd be better bidding for the £185,000 that is not on the scheme. Any ideas or suggestions would be gratefully recieved.
Thanks for taking the time to read this,

Martin.

Martin_Edwards

Anyone?
Cheers

PasturesNew

Why would you buy a house that is part of an odd scheme when you don't have to? Affordable housing should imply that local housing is not affordable, which is clearly not the case where you live.

Forget it, there'd be issues like this when you sold it too. It seems the current owner has conveniently forgot how grateful they were to get a property at 15% under market value when they bought it, and now want to play "beat the road ceiling" and "stiff the punter" with all the bigger fools.

Just go and buy the normal house and you won't have to advertise/explain any oddball clauses when you want to sell in the future.

Martin_Edwards

Thanks - the 100% priced house would be really stretching things to the limit, we've consulted a solicitor & my uncle in law (who's a senior E.A.) & have got a lower offer accepted -below 85% of current market value.

I really take on board what you're saying re:the quirlky reg's of this purchase, but it has enabled my wife & I to take 2 steps up the ladder as FTB's & yes the estate agents were trying to p.lay us, however they ended up with was a lower price for there vendor.

The house is now off the market 7 we have exclusivity over it.

Fingers crossed for a speedy completetion.

Andy_Hamilton

Last year I bought myself a 3 bed house 2 miles from Durham for £82.5K which was on an affordable home scheme. The house 2 down from mine cost them £125K for exactly the same house, that works out as 34% discount.
Nobody wanted the housing when they were just plans because of the fact you had to apply through the council so I just went in and bought when I really should not have.

When I was looking there was only 2 Mortgage lenders who would lend because of the fact there was a 4 year tie in with the council, If I want to sell it then I would have to offer it to people on there books first which really cocks things up if my house was reposessed.

This is my thoughts of it.
New house so no hidden costs when boilers break down etc for the 1st 2 years. Having to deal with builder who is slap dash was a pain.
I have been given a 34% discount which works out as £42.5K.
I have no intention of selling the house EVER. That's right, why would I want to pass on a discount of at least (in a market going up) £42.5K???

If i intend to move on, then this house will be rented as it would return much more than the mortgage will ever be.

enigmam

If i intend to move on, then this house will be rented as it would return much more than the mortgage will ever be.

Surely you can't sublet a home which is made especially affordable. I don't think they're that stupid. BLT'ers would just snap them all up and they would all be available to let.......

BiggaThanBen

Andy_Hamilton wrote: »

If i intend to move on, then this house will be rented as it would return much more than the mortgage will ever be.

Are you sure about that, might not be so easy ? I assume there is a sort of second charge on the property which guaranties 15% discount. If you want to rent the house, EA will probably ask lender to confirm that you have the right to rent it.

Curious what happens if you fully pay off the mortgage though ..

Andy_Hamilton

Apart from the normal covernents which all new builds have, mine has 2 extra.

For the first 4 years I have to offer it to anyone on the council waiting list, inturn they have to pay a deposit to secure it until they get a mortgage/funds. If they can not, I keep the deposit and have to offer it to the second person on the list. This is only done twice then I have the right to put it on an open market.

No matter what happens in the future I have to pass on 34% discount to the next buyer.

These homes were just available to 1st time buyers so no chance of developers getting there hands on them for at least 4 years. I'm sure I would have no problems getting a BTL mortgage but i'm a few years off.

When I bought the house I was very, very careful just incase I could not afford it in the future and always wanted the abilitly to rent it out if I could no keep up the payments.

The word affordable even in this area is very strange you would need to earn £27.5K to stay under the 3x multiple for mortgage lenders.

gabyjane

Hi we purchased a shared ownership house last sept, i know some people will say they are a bad move but in my opinion they are not really that different to the one you mentioned in terms of re selling etc and we know far more people that have had S/O and done well from them.

We cannot sublet ours unless there is good reason..i.e we went away for 6 months and i could get my sister to temp pay the mortgage while she lived here..there are rules though and i'm guessing this will be the same for you.

We bought a 40% share of ours and rent the other part (cheap rent too) the house was valued at £150k and we got a mortgage for that 40% 3 weeks it was revalued and it had gone up £3k, we panicked as it's not a mega amount but like you we were FTB and anything was a lot at the time! we did still pay mortgage for the origional amount though.. We paid a very small deposit and it's been fab..new build so no stress worrying about anything going wrong and if it does we don't have to worry!

Anyway enough rambling if you need any more info pm me..we are still pleased we have done it!

gabyjane

Ah meant to say that the comment about just buy one in your area hasn't applied to us for a long time..we have had the comments..'wait and houses will go down' 'wait till xmas' 'just save' etc for years..we have waited and been on the look out for a house where we live for 7 years and kicked ourselves for listening! ..where we are they just don't have S/O so been very hard..Current prices where we are for the same as what we have got would buy us a 1 bed hole! If there is something suitable for you then go for it but for us it's just not been the case!!
Good luck.

Andy_Hamilton

gabyjane wrote: »

Hi we purchased a shared ownership house last sept....

We cannot sublet ours unless there is good reason..i.e we went away for 6 months and i could get my sister to temp pay the mortgage while she lived here..there are rules though and i'm guessing this will be the same for you.

You can not sublet because you have a rental agreement. In "discounted" houses there is no rental agreement but normally a clause for a certain period.