Downsizing! Help needed with getting over stamp duty threashold(39 Posts)
Am looking for some advice please!
We want to downsize from a 4 bed detached house to a 2 bed bungalow (final move!). We will retire soon. We have a small mortgage (£30k) which we need to clear and no savings. Running such a large house takes all our cash now that our children have flown. Our house is well decorated, modern and spacious, and well maintained with really no negatives. It has attracted lots of interest and we have had several offers in our 2 months on the market.
Our house is valued at £279,950 (by more than one estate agent). We went sole agency with the one we liked best. Trouble is we cannot get an offer above the stamp duty threshold of £250K! If we sold at £250K we could sell it tomorrow probably to a dozen interested persons.
Do we practically give our house away to move? Our problem is that bungalows within a 5 mile radius of us are at a premium price, and stay around the stamp duty threshold of £250K. Dh will not consider a flat (we have pets).
I have had an idea that we could ask our purchaser to pay our estate agent and conveyancing fees to ease the costs of moving to make the calculations closer to affordable. If we paid off half the mortgage and had lower outgoings in a bungalow it would greatly ease our approach to old age!
Has anyone else every asked a purchaser to pay estate agent bill and conveyancing bills (probably asking them to pay out £6k in total)? I am not sure it is even ethical to ask.
What's the stamp duty rate at that level? Can you offer to pay it? Eg if it's 1% it would potentially cost you less that the difference. Iyswim. Might get over the barrier in people's heads.
Or don't people drop the price to get below stamp duty but ask for money for stuff like curtains, at an inflated price, to bump it back up? Don't know how dodgy/true that is, but have it in my head people do.
We had a similar issue when we moved and in the end had to suck it up. I don't know if it is ethical or not but our solicitor was firmly of the opinion that it was not legal.
Or yes your idea too. No experience though.
Which is fairly unhelpful ... I'll pack my bags
You could say that if they make an offer regardless of stamp duty, you will discount the price so they only pay 1%. So if they offer #280, they would have to pay #8,400 in stamp duty but you will sell for #275,100 so that they are only paying at 1%, iyswim (I think I got the maths right...).
Unfortunately they are more than wise to the whole 'pay below and pay for the fixtures', that's very much frowned on now and most solicitors won't allow it.
Problem is you're valued too close to the stamp duty level. I don't think you're going to get above £250, sorry.
Not all lenders let you add stamp duty to the mortgage and it can affect the ltv ratio so it's not as simple as pay less for the house to make up for the amount of stamp duty paid
What is in this for you?
If both houses are the same price are the running costs of a 2 bed going to be vastly different to a 2 bed? How will you increase your savings? Do you have a lot of equity in your current house?
There's one house near me on at 279,999 with an offer to pay the stamp duty.
That should say running costs of a 4 bed
that is too much of a gap. I paid £280k for mine (which is what it is worth) - an offer of £250k had already been firmly refused. If you were on at £255 I could understand but your offerers are taking the piss. What's wrong with people?
the only thing that occurs to me is to offer to pay half the stamp duty, which effectively reduces your price by 4k. You cannot legally charge £30k for the carpets.
Be wary about offering to pay the stamp duty if your buyers require a mortgage and are tight with their ratios. It has to be declared and the bank providing the mortgage will take any amount you pay, for any reason, off the value of the house.
So your potential buyers scrape their money together and just about have their 15% deposit for a mortgage of £275k, provided you cover £8k of stamp duty. So they make you that offer and you accept.
All sounds good, until the bank points out that because of the £8k you're paying, they're only valuing the house at £267k. Meaning your buyers can't then get a big enough mortgage to cover the £275k they've offered on your house.
I feel your pain as I owned a £250k flat and its price went nowhere for years, whilst places on the next tier up escalated out of my reach. I was lucky enough to have a lender who allowed me to rent it out whilst I rented myself, but I appreciate that's not an option for everyone in these days of stricter lending criteria.
Stamp duty is a very unjust tax. The jump from 1% to 3% is so unfair and it causes such disruption to the market at a crucial price point. It doesn't just cause financial hardship but emotional hardship: I've had to move twice in three years because of my landlords have sold up, and that lack of stability takes its toll on your psyche, particularly as you see prices rise ever upwards beyond the thresholds and realise your home won't catch up, so you're likely to stay in limbo for the forseeable future.
Should we start a e-petition, do you think?
I'd keep the price as it is and offer to pay 2% or the whole 3% of the stamp duty. That way the buyer are getting a good deal and you can move on with your life. I do think 2 months isn't that long to be on the market in this climate.
I think if you want more than 250 then you've possibly set your price at the wrong level. Rightly or wrongly, in the current climate people are expecting to make offers at 10% under asking which is what 250k is.
Many thanks for the posts.
LFC, - you are quite right that there would be very little in it for us in selling and buying at similar prices. The bungalow sellers would need to drop considerably and (unlike our house!) bungalows around here seem to hold their price and even sell over the asking price on occasions and get snapped up quickly. The running costs would be less on a bungalow but not so very noticeable as to let us recoup the drop we may need to make on our house if we sell £30k under the value.
You can see our dilemma and why I was asking for advice as we felt stuck.
We have had a good level of interest in our home but cheeky offers. Moving would not be worthwhile if we cannot reduce the mortgage considerably. The cost of the move will be wasted money.
Fluffy, LLLL, AWC - I like the idea of tweaking around with the stamp duty. I do not see why we cannot pay the stamp duty if we get a fair offer. It will depend on the offer but it could be the best way forwards. That is the crux of the matter, that bl**dy stamp duty! Aaargh! We are not greedy people but without a good offer it is just not worth moving.
They say moving house is more stressful than divorce. Better stock up on chocolate and a good Merlot! It may be a long year!
Any other ideas would be very gratefully received.
Would you consider moving to a ground floor flat with a garden or a smaller house to make the move more financially worthwhile?
I did get my sums wrong . An offer of 280k would mean dropping price to 274,400 to compensate for the extra 2% in stamp duty. An offer of 275k would mean dropping the price to 269,500 and so on.
I am currently looking to buy at the mo and we are looking at spending £260000 max (which would come to approx £268000 with stamp duty).
I don't quite get the idea about offering to pay the stamp duty though. I know I can only afford to offer £260000... If I were to offer £268000 on the basis that the seller pays the stamp duty, how am I any better off?
Maybe people who are offering £250000 are doing so because they can't afford to go any higher or they do not feel that the property is worth over £250000.
I think it's the psychological aspect. Someone may be able to pay 280 but doesn't want to give the government nearly 9k in tax or may not have that money avaliable in savings. It means house valued around 270 to 280 can be hard to shift.
Hi OP I'm Bowlers DH . Your suggestions are valid, however, there are a couple of issues. If you mention to your solicitor That you have asked your buyer to contribute to moving costs he Would be bound to say no! It would be seen by hmrc as a way of avoiding tax, which they take a very dim view of. Your agent is unlikely to allow it as his contract is with you. How does he force the buyer to pay his fees without going via a legal contract with solicitors??? Again if solicitor involved then he has duty to inform hmrc etc......... The only possible way is to accept £250k and get buyers to give you something on the side. In cash??? You would have to meet them on day of exchange, and on exchange they give you whatever allowance you have agreed. Only way. Sorry.
Fixtures and fittings no longer work. Used to. But no more. Seen as part of contract.
B'sA dh - I did have my doubts about how ethical it would be asking any buyer to pay estate agent fees for us if we accepted an offer of £250k. I do not wish to be arrested for tax evasion so will strike that one off my (desperation!) list!
Fluffy - dh will not even consider a flat. He has a motorbike so fears a petition from other tenants if he starts it up for work at 6.30am! A semi or detached place is the only solution for us as long as he wants to be a biker and I want a dog.
There is a psychological block about paying 3% stamp duty to hmrc. I know that if it was me I would not be happy so I do sympathise with buyers who make an offer of £250K.
I may try a cheeky offer of £30k under the asking price on a bungalow that we like when we start viewing - I will wear a hard hat and running shoes!! It may be a case of finding a place then being squashed (hopefully!) by the stampede to offer on our house at the lower price.
Good luck, it's worth a try.
I think it's often hard to divorce yourselves from the actual figures. 30k sounds like a huge sum of money but if you can save that on your next purchase you've not lost out at all.
Can you stay put and divide your house into flats, selling off the top one once they're done? That sounds much more profitable and practical.
What is your house listed at? That could make a difference. Ours was valued at around 280 so we listed at 300 and have just accepted an offer of 285.
30k below asking isn't a cheeky offer providing you are able to proceed. We offered 50k below asking and got accepted. I think * nocake* has a point. Although on the other hand, it may deter buyers to make reasonable offers on the basis that its over priced.
When you say your house was valued at £279,950 by more than one estate agent, what you are really saying is that more than one estate agent suggested you market your house with an initial asking price of £279,950. The EA isn't valuing the house, they're suggesting a selling strategy.
Houses are selling for 93% of the asking price, on average. See here - Hometrack
So that would be £261 ish, which is really way too close to the threshold.
If you sell your house for £250k you wouldn't be selling it at "under value", you'd be selling it for the amount that it was worth to the buyer. Similarly an offer of 30k below on a bungalow priced at 250k would not be cheeky. It would be sensible!
Have you looked on RightMove at sold prices for similar houses?
To be honest, we did exactly this - listed at 280, sold for 249950 but offered 25k below on te house we were buying. They were happy to accept this as we were ready to proceed (and our buyers were chain-free). The delta between houses was the same so it made no difference to us (except I suppose we paid less stamp duty!)
A house is only worth what people are willing to pay for it and in your case that's 250k.
Yep! BF and Btbc - am coming around to the same conclusion. Our house is only worth what someone will pay and an offer of £30k under the valuation is not cheeky. It certainly is a different market and you can probably tell that it has been a while since we moved house. I think back then we were distracted from worrying by a young family (and sleep deprivation) but now we are "empty nesters" and so more focused on what is going on. We are also not earning what we used to so are counting the pennies more than before.
I am going to move forwards with more confidence now and just hold the end goal in sight. We really do not want to be rattling around in a 4 double bed house in our 90's and selling the odd kidney or other wrinkled body parts in our old age to pay the gas and electric bills!
I will try the stamp duty negotiations first but start viewing bungalows and if we find one we really like at a price that makes the maths worth it ........ it is all systems go!
We sold yesterday. The offer was above the stamp duty threshold (Yay!!). The estate agent said that our offer to pay the 2% stamp duty made all the difference. The offer was just short of our asking price but £5k approx lower still because we are paying the 2% stamp duty but still enough for it to be worthwhile making the move to a bungalow.
Thank you so much to all posters for the excellent advice and moral support.
Yay - I suggested that, I am a genius . Hope it all goes through smoothly.
Yay indeed. You were inspired by my initial stamp duty payment suggestion though, weren't you Lala
Oh dear, did you get there first, Alice? I was too impressed by my own cleverness to notice . <<shuffles off embarrassed>>
No you were indeed the winner. I suggested paying the whole lot. You fine tuned it beautifully.
You are all superstars in my eyes. You all came in and offered much needed support and good solid advice. Much appreciated when feeling very stressed!!
Thanks to all xx
Could I ask, now that you have your answer, what would be the stamp duty on a new build costing £257,999. Thanks
Thankyou I thought it was worked out on a percentage on the difference between the £250,000 and the cost. At least I was hoping that.
Nope, flat 3% once you go a penny over 250k, you've got to get the price down to 250k and then it's only 1%. Stamp duty will soon be 7% if you buy over 2 million (which doesn't buy that much in a lot of inner London ).
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