Over-valued property fraud

[dognamedspot]

I'm hoping someone with conveyancing experience or similar can help me to work this out. In 2008 my DP purchased a property via a property sourcing company (that eventually went into liquidation with millions of other people's money vanishing!). Everything seemed to be done properly, using a solicitor and he brought the property from a private seller sourced by the company. The property was valued for mortgage OK, everything seemed fine. Obviously with hindsight things would be done differently, independent dilligence etc, but I wasn't around then and it did seem to be a reputable company.
In recent years I realised that the property was massively over-valued for the mortgage. Probably at the time in the region of £40k. Zoopla confirms that nothing in the same development sold for anything near what he paid.
Result being that when he sold it recently he ended up with a massive negative equity debt that he's paying in never-ending installments.
I've been advised to raise a complaint with the mortgage company. We can't go after the valuer because we didn't commission them. The aim would be to obtain some compensation in the form of at least a reduction in the debt on the basis that the mortgage company were negligent. (Advised to at least try this by a financial adviser).
I'm trying to work out... how did the professionals involve profit from this? The property sourcing company, valuer and solicitor? Would it be as simple as the seller being told they could sell at an amazing price with a substantial fee to the property sourcers - who then pay off their dodgy mates? I tried speaking to the company the solicitor worked in and they were very cautious, but it was clear that she'd left under a cloud.

I'm not in conveyancing but before you go anywhere with it, it depends on how overvalued it actually was. Ie what is £40k over valuation compared to the true price? If 10-20% you would struggle as it is opinion and you would need to prove negligence really. If really massively overvalued, ie 50% then it may be different but then it sounds like more of a fraud operating

I'm not convinced this is fraud. it is often quoted on property threads here that the value of a property is the price a willing buyer is prepared to pay. no one forced him to buy. it was foolish not to commission a properly independent valuation. there's another saying 'a fool and his money are soon parted' which also springs to mind.

I would think it will be impossible to prove that the house was overvalued 12 years ago. properties always fluctuate in value according to demand and houses in the same street can sell for very different amounts only weeks apart due to one being subject to a bidding war as there happen to be two interested parties, and the other just missing the boat and not attracting viewers.

new builds of course are always massively overvalued by list price and it is not at all unusual for a development of new build properties to sell at a variety of prices for the same model of home due to each price being haggled down from the list price according to the negotiation skills of the buyers - some of whom will just cough up list price and more fool them. when a valuation survey is commissioned for a new build the reply is always (in formal and fancy language) "we don't really know" - as their true value will be established by the market when they are sold on.

Probably they paid the owner what the actual value was and pocketed the difference.

I have very little knowledge on this but in the industry I’m working in atm there is a need for surveyors to have good insurance to deal with the new legislation being brought in following grenfell.

Whilst this doesn’t sound linked, I understand that surveyors cannot obtain the right levels of insurance because the insurance companies are reluctant as they are already dealing with claims from over valued house sales.

I genuinely don’t see the harm in writing to the mortgage company with the information you have and ask them to look into to the matter.

This is the type of thing I’d imagine Martin Lewis money saving expert has advice on. Have you checked out his website?

The other thing to consider is the timing if he purchased in early 2008, then the bubble burst with the banking crisis in mid 2008 it is going to very easy to say it was the market.
I bought property in 2008, made the offer in March which of £275K which considering it was a commercial property in the south east with a two bed flat seemed very reasonable. By the valuation in June the valuation was £250K.

I've been open and honest about what happened and I think it's pretty poor to start talking about him as being a "fool". I don't know many people who commission an independent valuation when taking out a mortgage on a property. They generally wait with baited breath hoping that it will be high enough. There is also background that I didn't think worth going into about why he trusted the property sourcing company. Anyway...

This property sold for, from what I can work out, somewhere in the region of 30 - 40% higher than any similar property in that development of flats. It wasn't a new build, the flats were I think about 20 years old. Much documentation on "dilligence" was produced.

Nothing on Martin Lewis that I can find.
I can't see how the professionals would have been able to pocket the difference between real value and what was paid. Because when the paperwork for a sale is completed everyone can see the sale price before they sign. I suppose I'm posting this to see if anyone actually knows how this sort of fraud could work, because I think it was fraud. It just nags at me from time to time, I like to understand how things work.
I will write the letter anyway, nothing to lose.
Incidentally, if he had commissioned an independent valuation, even though it was 12 years ago, there are companies that will investigate and take a claim forward on a "no win no fee" basis. I spoke to one a few years back. In this case only the mortgage company could go after the valuer because they commissioned the survey.
Thanks very much for the input.

It’s really difficult to determine what fault, if any, there was going on. As one pp pointed out, 2008 was an exceptionally volatile year for the housing market. But even more so, it was a period of massive upheaval in financial regulation specially around mortgage lending. Banks and building societies could no longer offer big multiples, 100%+ mortgages and interest only loans. This had a big impact on speculative housing schemes.

I seem to recall some scandals around buy to let investments in NW and NE England. This involved companies who sourced property on behalf of individuals on the basis that their capital was “secure” and they would have an “income”. The properties were new build flats whose price subsequently went into free fall.

It might be worth scanning the internet to see if there are support groups. Money Saving would be a good place to start. But I’m not sure if this was anything more than a bad investment decision. The properties losing value in a falling market and having big service payments that eroded income. An obvious risk that could be anticipated by a reasonable adult.

Sadly, the financial crisis hit the housing market badly in 2008 in parts of the country, which have never recovered prices hikes from the housing bubble.

property sourcing company (that eventually went into liquidation with millions of other people's money vanishing!). Everything seemed to be done properly,

Bit of a contradiction

I would imagine how it worked would be that the property was overvalued

The property company skimmed a payment of the top (probably disguised as an introduction fee) before paying over the price to the seller

I really struggle to see how you could claim against the mortgage company

Everyone I know commissioned their own survey for the properties they bought. That’s always been the case whether 10 or 20 years ago, housing bubble or no housing bubble. Especially if it wasn’t a new build. You never what might be wrong with it. A structural fault could render it valueless.

FWIW I think you’re right, the mortgage company should have had an independent valuation because they wouldn’t want to be lending against something where they won’t get all their money back, for example if your partner had died and had no other assets they would have had to write off the £40k, so I do think they were at fault.

You can get a retrospective valuation for the date of purchase, even though he doesn’t own it anymore the agents could do a drive by valuation for you.

The way they could have done the fraud is that by charging a large introduction fee, so he pays them and they hand over the money to the seller minus their fee. Possibly not technically fraud as the seller would have agreed to the fee but not transparent to your partner either.

No harm in writing to the mortgage company and seeing what information you can get.

There may have been a scam whereby the property was overvalued by the property sourcing company and they got a kickback from the seller. Or possibly not. Either way the bank must have relied on a valuation to lend and they did lend their money so unless you can prove they were complicit on the fraud, I doubt you would have much recourse. But who knows. Hope you get it sorted anyway op.

Thanks very much for those who have helped. Clearly the mortgage company was misled by the valuer because, believe me, it definitely was massively over-priced. I can research that much, which is why we've already been advised to at least try taking it up with the mortgage company. Whether or not to do that wasn't the question.
From the mortgage company's point of view, they want to be reasonably assured that if something happened to their customer, they could get enough out of selling the property to repay the mortgage in full. That's right isn't it?

As I said before, it wasn't a new build.
The point of my post was really to see if anyone knew how the dodgy professionals involved would have got their hands on some of the money. Sourcing company charging a massive fee then paying them out seems to be the most likely option. I hope they can sleep at night, I know of at least 2 investors who committed suicide when it all came out.

"property sourcing company (that eventually went into liquidation with millions of other people's money vanishing!). Everything seemed to be done properly,

Bit of a contradiction"

And - "there's another saying 'a fool and his money are soon parted' which also springs to mind."

We can all be very clever and sarcastic after the event. But think about all the companies that go into liquidation losing people money. Everything usually seems to be done properly with them as well and they appear to be reputable. We don't have bloody crystal balls and we all do a lot of business with various professionals and companies without first carrying out a forensic audit. We're not in AIBU here and if anyone wants to re-read my post, I asked specifically about how the money would got to those involved. I acknowledged that with hindsight things could have been done differently, with more dilligence. Is there really such a need to put the boot in?
I am very appreciative of the help and advice given here, really, it's just given me some more perspective. Thank you. You never know, someone else in a similar situation might come across it in the future.
This means that I'll happily leave the thread now, and not come back to listen to responses from those who just couldn't help themselves and had to post something nasty.

You = partner!
You can check to see if the solicitor has had disciplinary action taken against them on the SRA website, although not all actions are reported.

It's difficult to see how you could pursue a complaint after this length of time, however I think the statute of limitations is 12 years for land transactions so if you were to intend any legal action you may need to do that before time runs out this year. Pursuing a complaint to the mortgage company will be fraught with obstacles but it's always worth a shot. Do make sure you follow their process to the letter. If you don't get anywhere take it onwards to the Financial Ombudsman, you have nothing to lose. But, as other posters have said he may just have made a poor bargain.
It might be worth checking what the rules were at that time to disclose commission and other payments. It might also be worth pursuing a complaint to the law firm you used on the basis of poor advice but tbh that's pretty tenuous due to the time that has passed. You will struggle with that without the file which the law firm may not have retained, and because of the length of time would prove difficult. First step should be to obtain the file. Re S of L, I believe time starts running from the point where you knew or should have known. Hope this helps.

You might also check the law re whether the mortgage company's surveyor owes either a contractual duty or tortious duty to you. It never used to but i have the feeling some fairly recent case law changed that. Sorry but this is on the very edge of my area!

Valuation reports obtained for Lenders are not to be relied upon by purchasers
They normally say that on them
That really was the mistake he made
I am sorry if you that I was being sarcastic
That was not my intention
I was just being realistic
IME (considerable) there is no chance of a recovery here

I think I'm missing the point

Your bf found a property he liked and thought the price was reasonable and made an offer

The fact that it was over valued is not the issue here, it's that your bf agreed to pay that price

The property is only worth what someone will pay

He made a mistake. He overpaid for a property. He didn't do his homework properly and look at the local market, etc before making the purchase.

I cannot see what recourse he things he has

@BritInUS1 you have missed the point that there was a lack of transparency and that disclosure should be made if fees are being taken by other parties. That is set out in one of the acts sorry i don't have time to research it right now. Your take on things is a little simplistic but a 'bad bargain' may be where op is.

He only sold recently? And was still in negative equity?

He made a mistake. He overpaid for a property. He didn't do his homework properly and look at the local market, etc before making the purchase.

^Completely agree with this.

Thank you very much again to those who understand and have been helpful.

"He only sold recently? And was still in negative equity?"
"He made a mistake. He overpaid for a property. He didn't do his homework properly and look at the local market, etc before making the purchase."

Thank you for these comments, it's all in the original post, and doesn't help me with the actual question I asked.