Tricky one I know - are we overpaying for this house?

[Zimm]

Had an offer accepted on a house we love for 267k. But it is really 259K as they are paying stamp duty as they need to achieve over 250 to afford their move. (I already know some lenders will have an issue with this and have a broker on the case). The house previously sold for 230k in 2006 BUT i know they have done a lot of work since then, new bathrooms, kitchen, flooring, all decorated etc. It is beautiful. Also work in the garden. The house's (I presume identical as a terrace) next door neighbours sold for £262,500 in 2008 and £271,600 in 2007. Zoopla suggest the place we are buying is only worth 224,00! I know the valuation will help to some extent but any initial thoughts? FWIW I don't mind overpaying a bit as it is the perfect house for us as a family for many, many reasons. But I don't want to be fleeced!

the lenders position is to do with mortgage fraud and what the "real" price or value of the house is. One of the risk/return factors lenders will look at is the loan to value ratio. If the transfer value is inflated because the seller is offering a seriously high financial incentive to a buyer then the lender is at risk . This is because the true loan to value ratio is higher than the lender expected on account to the true transfer value being lower.

Understandably lenders do not like this because it misrepresents the market value, and which could leave them exposed in the event of foreclosure and repossession.

Zimm - What I do not see is what the benefit to the seller is in paying the stamp duty. Why do they not just sell it to you for £259K?

(I can see the benefit to you in doing it that way but therein lies the "fraud" to the mortgage lender,...which I am sure is not your intention and of course this incentive is at the suggestion of the seller, not you)

Thanks for clearing that up LittlePushka.

I don't really follow the in's and outs of this. But could you pay 250 for the house and 5/10k for the chattels? You can pay a reasonable amount and avoid stamp duty. Your solicitor should be able to advise what a reasonable amount is. If you can make the numbers work for you can the vendors it could work.

Thanks to those who have made an effort to understand this! Littlepushka has explained it perfectly. The reason the seller offered the incentive was they needed to achieve over 250k for the house - 250-270 is a black hole for houses because of the Stamp duty threshold. So their incentive is they are not stuck at getting offers of 250 for a house 'worth' 267 and our incentive is we don't have to stump up 8k cash, we can add it to our mortgage. Except we can't as the lenders won;t allow this - which is why I am cross as the agents must have expected this but know that everyone is emotionally committed to the process at this point.

thelittle kiwi - if we had 5-10k for chattles we'd have 5-10k for stamp duty so doesn't solve the issue, but thank you for trying to help.

For clarification - we can afford a mortgage of 267k, that's not the issue, it's the fact we only have enough cash for a deposit of 15% if we don't have to find 8K stamp duty. As we do have to find the stamp duty, we will now do a deposit of 10% and get a crappy rate. Or we could borrow off our parents, but quite frankly I haven't asked mine for a penny since I was 18 and I don't intend to start to now.

Good for you Zimm! I understand that perfectly! Is a 0% credit card an option? Or can you give the vendors a "take it or leave it" offer of 250k? With house prices dropping its unlikely they'll achieve more than that if they remarket the house anyway.

Its a pity they didnt clarify the position at the outset before you got so far along the line.

Keep us posted, & best of luck. :)

I agree with sparkle, offer them £250k and see what they say.

Just a wee note on the apportioning the offer price between "bricks & mortar" and chattels. The amount has to be realistic and to find £5,000 to £10,000 worth of second hand chattels being left in an Average Joe house is very difficult.

If the amount attributed to the chattels is high and the price is hovering around the £250K threshold, then I would expect your solicitors to want to see a valuation of the chattels to justify as they could be potentially liable for tax evasion or a fraud on the revenue if the figures are fudged to fit the tax bracket.

HMRC are very wise to the ruse. So ensure that the deal is done at the proposed apportionments right from the moment you makethe offer and be prepared to provide evidence of valuation of the chattels in case HMRC call it in.

Good luck Zimm

There are ways of legitimately avoiding the payment of SDLT but not sure if it would be worth it for you. You need a solicitor who knows this area as most will throw their hands up in the air and run for the hills.

I can ask my DH as it's his area of expertise. That said not sure if it would help your situation. Let me know if you want me to ask him. I can't remember it all myself as I tend to glaze over.

Deux - thank you - if your Dh has any ideas I'd be happy to hear them. Sparkle princess - thanks for your comments - we have considered offering them 250k but we are 99% sure they won't accept it, it's a tricky one. Have one broker taking a final look at the market.....