gifted deposit mortgage mess

bishbash55

hi, i have a problem with my buyer, initially i was offered 117k for my house which i accepted. the buyer told his mortgage lender it was with a gifted deposit ie a sale of 122k, 5k gifted deposit.
we had not made that arrangement so instructed our solicitor of that.

now the problem, i phoned the buyer and he said he is still pursuing this gifted deposit which he says he will aquire tomorrow!
our estate agent has said they dont want any part of the sale as it is fraud on the part of the buyer. the buyers solicitors have been atrocious throughout the attempted sale and my solicitors are becoming increasingly worried about their competence.

it looks like we are going to loose the sale. is it too late to try and salvage a sale by going down the gifted deposit route and if so what does it mean?

any help would be appreciated.

Tiddler_2

The "gifted deposit" is basically saying that the property is worth £122k but the buyer is getting it for £117k. You then "give" the buyer the difference of £5k towards their deposit. In the current market they would need at least £1100 plus solicitors fees from their own funds. I would ask your Estate Agent why the buyer is looking to do it this way, as part of their job is to make sure that the buyer is in a position to buy the property, through qualifying him/her.

It doesn't actually cost you anything and is perfectly legal but depends on 1 major thing - the property being valued at £122k by the mortgage company. Also not all mortgage companies accept this "transaction" and the buyer has to make sure that his mortgage company is aware of the transaction in order that the valuer can take it into consideration.

The fact that the buyer had not discussed this with you is obviously out of order - and you could have quite easily scuppered his plan when the valuer came round to value the property by telling the valuer you were selling for £117k!!

dunstonh

Gifted deposits are not fraudulent when disclosed and the real purchase price used. However, increasing the value of the property to hide the gift and recording that as the purchase price is fraudulent.

The estate agent seems to believe it is the latter that is taking place and quite rightly doesnt want to know. Indeed, the esate agent should really be reporting it under the money laundering guidelines (which incorporates fraud) and it is possible they have already done that.

bishbash55

thanks for the replies, just a question.

would i be within the law to accept his suggestion of 122k and give him 5k back gifted at this late stage?
there should be no sugestion of an inflating the price as when he came to view, the house was on sale for 122k.

if not do i have any options in terms involving a gifted deal now?

put simply i stand to loose my fees, it would make sense to make a small loss on the sale rather than have to start the process again with a new buyer.

homer_j_3

if the asking price was 117k then no you cannot increase the purchase price.

If it was 122k and you accepted 117k then the gifted deposit could be applied, whether or not it is too late now is a another story.

What was the sale price of your property?

bishbash55

the asking price was 122k
i was offered 117k which i accepted
the "buyer" informed his solicitor there was a gifted deposit sale.
my reply to our solicitor was that a gifted deposit sale had never been discussed. just an offer of 117k which we had accepted.
teh "buyers" solicitor is informed.
i inform my estate agents about this offer who says dont worry this is usual practice ect.
4 weeks pass..... with no mention of mortgages.
we are at the point of completion
the "buyers" solicitor tells my solicitor he cant exchange because the mortagage offer paperwork is not correct because it still states gifted deposit offer.
estate agents and my solicitors state this is tantamount to fraud.
i phone the "buyer" who is still of the opinion that a gifted deposit mortgage is perfectly ok and he is at the point of making the final arrangements.


help

chappers

Basically he is trying to get what is in effect a 100% mortgage, what he is doing is not technically illegal however as Dunstonh says inflating the price is. Also I would be a bit !!!!ed off that he didn't inform you of his intentions first as this may have influenced your decision as to whether to accept his offer or not.He may not be able to pull off this "fiddle" and you could be left without a buyer.
Personally speaking I would have probably chosen a £5K lower deal from a cash buyer or someone who had adeposit and was taking on a less risky mortgage deal.

bishbash55

yes i am a little annoyed to say the least, at him, my agents and his solicitor. there is a good chance (or is that bad) i will loose the sale.
im just wondering if this is part of his stratergy to negotiate a lower price at a late stage. either way he needs a lump sum to pay his deposit as he obviously has no equity.
its going to be tough for me to absorb what i have already spent on fees. no point getting wound up, but i could use some advice how best to proceed with my first house sale.

silvercar

If you don't want to lose the buyer then you will need to accept the gifted deposit idea. You don't lose by it, so its not really a deal breaker. The buyer and solicitor could have handled it better.

Ian_Griffiths_Halifax

I think the buyer has simply not communicated properly when negotiating his purchase price. If he had asked you if you would accept the asking price, subject to you paying his 5% deposit, then there would have been no problem. The purchase price would have been recorded at £122k and the solicitors would have been advised.

Instead, it appears that the buyer has 'heard' about the vendor deposit scheme' but only heard half the details.

Conrad

WHAT ABOUT THE LENDERS VALUATION?

In any market the price accepted by the seller is effectively the market price (ie £117k). You are expecting a valuer to confirm its worth £122k, yet no buyer thought it was worth that or you would have achieved that price.