Shared ownership

[rusholmeruffians]

We are looking at a Vivid shared ownership property and wondered if anyone had any experience and could tell us the pros and cons?

Check what the criteria are when you want to sell - I had to let my housing association value the property and could only sell at that price despite market rate being higher and I had to give them 12 weeks to market it to people on their waiting list (during which time they did nothing) which delayed me being able to move. Only after that twelve weeks could I instruct an estate agent, and first viewer bought. The housing association delayed the whole process and it took from selling in August to moving in January to get it all through.

Also if it’s a flat check the service charge and who is responsible for what maintenance.

Check what legal fees you need to pay if you want to staircase and increase your share.

I did it. Worked out very very good for us!

Be really clear about staircasing because they get a valuation done and do it at the current market price not the price the house was when you first bought it.

Thank you for your replies. It is a house but we've heard there can be problems if you want to sell. Looks like our only option at the moment if we don't want to keep renting.

@rusholmeruffians it was a really good move for us. In the location we wanted and the house we wanted. But affordable. We were never going to sell but was going to staircase eventually. If you're going to staircase then you need to do it asap as the e cost of the house goes up so that gets added onto how much you'd buy it for. Happy to answer any questions you've got. We own 100% now.

Even with the problems selling mine, it was the right thing to do - the mortgage on my share, rent on the rest and service charge were still less than a mortgage on 100% (which I wouldn’t have been approved for).

@iloveyankeecandle thank you. I didn't realise that the staircasing was worked out like that so that's interesting.

@Fallulah thank you. What problems did you have when it came to selling? That's what I'm worried about.

Check the contract / terms regarding stair-casing and selling very carefully. We bought a shared ownership in 2007 and it promptly fell in value when the market crashed. I think this is worth knowing and checking as we are potentially looking at house price falls this year.

We owned a 35% share and understood that as the value had fallen we would either have to ride it out or lose money. After 4 years we were keen to sell. We had paid down the mortgage and had some savings so were prepared to take a loss on the fall in value but found if we sold we had to pay the shared ownership company 65% of the higher of the market value or original price.

So then we thought maybe we can staircase and at least we will own more but again the staircase terms were calculated using the higher of market value or original price.

Basically in every situation the shared ownership company enjoyed the upside but we took on all of the downside and had to pay them for any fall in market value. Not all are line this so it really is worth checking.

We sold as soon as market value came back to what we had originally paid. I know you said you're not looking to move but you never know how circumstances will change.

In terms of selling we had always been told that we could only sell our share to a three shared ownership buyers and that massively restricted the pool of buyers- we advertised it for ages through the shared ownership company with not a single viewing.

I honestly thought I would be stuck in that little flat for ever but luckily we found out that a neighbour also on shared ownership had marketed the property full price on the open market and their solicitors did a 100% staircase and sale simultaneously and we did the same.

@MavisTheMonkey thank you, that's really helpful. Will double check all the small print.

If your only alternative is renting it's worth considering as it is more secure.

I think the biggest two things to consider are

1. is there a rent payable and if there is, how does it increase? We ended up in a situation where our rent gradually increased until our rent plus mortgage was greater than a mortgage would be on the full property. Our neighbour ended up in a situation where she had to switch to an interest only mortgage. This isn't necessarily a disaster though which brings me to my next point:
2. how long do you see yourselves stayed in this house? Shared ownership really only works in a static or increasing market. In a declining market it's problematic. If you want to staircase in a declining market, you can get in a mess if your deposit isn't big enough. We found ourselves in a situation where our income had doubled, a perfect credit score, overpaid on the mortgage the price of the house had decreased and our rent plus mortgage was bigger than the full mortgage but had problems getting a mortgage lender to accept us. The problem was the 10% deposit we had on the house had effectively been wiped out and we no longer met the criteria for FTB mortgages (even though it was still our first house). We had to raise a 15% of the reduced value of the house. Our mortgage lender looked at the figures and thought it absolutely nuts and we weren't a risk but still couldn't give us a mortgage. We did eventually find someone but it was a massive pain in the backside. If you want to stay for just a few years and then move on, a declining market is problematic because you can't be flexible on the price of the house. It's a fixed price set by the HA which is difficult to renegotiate if the house doesn't sell. It means that it's wise to air towards a lower valuation if possible rather than the normal thing of trying to maximise your sale price. I've heard of a friend of a friend being stuck for four years because of the fixed price trap. Shared ownership is attractive as a long term more secure alternative to renting though, if your options are limited and you are not planning to have a significant change in circumstances (watch out for the surprise baby issue) but see my caveat about rental fees increasing.

I don't think shared ownership is either good or bad. It really depends on your personal circumstances - it's not for everyone but it's great for some.

My advice on it is to always check the small print on the detail of the agreement. Schemes vary massively from scheme to scheme so don't take the advice of someone on the internet who may have a completely different type of contract to the one you are looking at. Make an effort to find a solicitor who has experience with shared ownership - they are often more expensive but it's worth it to avoid nasty surprises further down the line. Also be aware that not all mortgages are available for shared ownership and the rate you pay is likely to be higher.

The very last sting in the tail for us was when we came to move from our 100% owned house (after we had staircases) to another house. We had to ask permission from the HA to sell! They had first refusal on the property and had to sign a release to say we could sell on the open market. This was a massive pain in the arse, because they were so fucking useless and workshy. Any dealing we had with the HA directly was dreadful, and I've never heard any different. Fortunately our contact with them was always limited but dealing with them really should carry a health warning.

Understanding what you are getting into really is the big thing. It's not for everyone.

Interestingly our staircasing valuation wasn't worked out like this. They valued the property at a lower valuation than the one we had. Our valuation would have, ironically, made it easier for us to buy the property because our initial deposit wouldnt have been wiped out making it easier for us to get a mortgage!!!!

Which just highlights why you need to check the small print and ideally get a good solicitor with experience in shared ownership if you do decide to pursue it!

I don't know that I've seen schemes that are identical - there is such a variation in the ts and C's.