Is it really all that bad?

PasturesNew

Public sector jobs will have to go when there's only a dozen people in the country still working.

Might get rid of some of those ridiculous jobs that have grown, multiplied and had big salaries in the last 10 years.

Access to Council Services for Left Handed Dwarves
Open Spaces Manager for Grass Verges
Department of Translation into Klingon

etc etc... I'm sure we've all seen loads of them over recent years

Too many departments not actually contributing or producing.

Generali

!!!!!!? wrote: »

OK, here's how it works.

The vendor knows that the house is really only worth 180k on the open market, possibly less to get a sale, because it's weak and falling. But he has a load of others to shift and wants to maximise how much he gets for each of them.

He puts house on at 200k and offers to 'pay' a 10% deposit for the buyer.

The buyer thinks "Wow, what a deal. I'm saving 20 grand!". Uses the deposit to obtain a 90% LTV mortgage to the amount of180k from the bank and pays 200k for the house.

That property is now 'valued' at 200k (because it attained that price at sale) which helps keep selling prices on other similar local properties high.

The vendor gets the deposit he paid back anyway, plus the 180k that the property is actually worth so it has cost him absolutely nothing to prop the prices of his properties up by 20k each.

The buyer has ended up borrowing a full 180k to buy something that really is only worth 180k in the market - leaving him instantly at danger of negative equity in a falling market. He also has actually 'saved' nothing in the deal because it still cost him 180k regardless of the dummy "10% gifted deposit". (Maybe he's committed fraud as well if, as likely, he didn't tell the mortgage lender about it!)

The bank has effectively given mortgage of 100% LTV when they thought they were only giving 90% LTV. So they are overexposed and stand to have a lot of trouble extracting the full balance of the mortgage should they subsequently repossess.

The thing is, this only works if the surveyor agrees with the valuation of the buyer and seller.

This worked just fine when pricing worked along the lines of think of a number and add your phone number to it. These days I believe that valuers are rather more conservative and so this sort of thing won't get through nearly as easily.

MrDT

Generali wrote: »

The thing is, this only works if the surveyor agrees with the valuation of the buyer and seller.

My thinking exactly, the mortgage lender will arrange their own valuation and if that valuation comes to 180k as opposed to the claimed 200k you ain't getting a mortgage.

Unless, of course, it really IS a 10% discount off sale price, not an underhand kickback, i.e. lender values the property at 180k so you pay 162k and get 18k paid by the vendor... Convinced? Me neither lol!

I reckon a few sales might go through on this basis, and the unlucky new owners (that probably assume they got a great deal) will be in instant negative equity. It'll stop working soon enough, no doubt lenders are wise to this, and without HPI to back their risk they aren't gonna touch you.

Not just developers doing this either, seems to be the new EA trick of choice too. Gives me a chuckle when going through my propertybee listings to see a price go UP by 10% and '10% deposit paid' added to the description. How dense do they really think we are?

The same people that got suckered by 100-125% mortgages will get stung by this trick. Nasty business.

Generali

MrDT wrote: »

Nasty business.

Caveat emptor old fruit.

[Deleted User]

Wow, never expected this response, and yes sorry i should of said i've accepted an offer on my house from first time buyers witheverything approved prior to buying.
Well if the mortgage company does'nt give me a mortgage then yes i guess i will look silly buying now and i'll end up losing my deposit, but come on just wanted some opinions from other readers.

Thanks

Generali

Good luck theguru. I hope it all works out for you.

[Deleted User]

Go on treadmill what was your good news story, getting fed up about reading doom and gloom stories all the time.

Theguru

brit1234

Deleted_User wrote: »

Go on treadmill what was your good news story, getting fed up about reading doom and gloom stories all the time.

Theguru

We have had years of media article trumpeting price rises, its time to re address the balance.:D

SingleSue

The deposit trick is not a new one......it was happening in 1990 too!

We got offered exactly the same deal, we had offered 39K (blimey that looks such a small amount now compared to house prices currently) on a house but the mortgage advisor attached to the estate agent suggested if we were having problems getting a deposit together that they could go for 41K (which it had been marketed for), thus then having a 95% deposit rather than a 100% one.

We had savings so turned him down, never realising it was a scam to try to keep prices artificially higher in the stats.

lypsey

Good post !!!!!! , just to point out that in your example when you say "The buyer thinks "Wow, what a deal. I'm saving 20 grand!". Uses the deposit to obtain a 90% LTV mortgage to the amount of180k from the bank and pays 200k for the house."

Iamstacie just for clarification when the poor person coming next in the same street looks at the Land Registry figure this will show as being sold for 200k which is totally incorrect. This has been gouing on for ages now in a rising market .... it will be very intersting to see what happens in a falling market??

By the way for the record I think houses will fall between 40 and 50% in value