What would you do? New Stamp Duty Rules

[Sammyjoegreen]

Hello All,

Thank you in advance for reading and any responses.
So I am sure we all have heard about the impact of the new national budget on stamp duty. I am in the process of purchasing a house for myself and my toddler which I was hoping to make our forever home. However, following yesterday's budget we're now facing almost 40K in stamp duty charges as I am not a first time buyer.
Could we still afford it? Yes but it means we won't be able to tackle any refurbishment work the house requires for a while and these are essential as I have a small child.
I am considering the following options:
Option 1. asking the seller if they might consider deducting the additional stamp duty from the purchase price or at least a portion of it. I feel bad about doing this as they have already had a previous transaction on the same house which was near completion fall through for financial reasons on the side of the buyer. They are selling as they need to downside following partner's passing
Option 2. Look for a cheaper property but I've already paid for a survey and part of the legal fees for this one. Also, there really isn't anything that is considerably cheaper in the area that would make any significant difference. Average price is about 550K. I'd have to look at moving to a completely different area far away from family.
Option 3. Continue the current transaction and save till I can afford the refurbishment work.

Help please! What would you do or are there any other options you could suggest?
Thank you.

Yes, the fact that you could sell the first property and reclaim the tax means that if your seller reduces their asking price they are literally giving you cash (as opposed to making money available just to pay the extra tax).

I would do as this poster says - go ahead with the purchase as you are, but put in place a three year plan to dispose of the first property. Either arrange for your relatives to buy it off you, or to sell on the open market. Your relatives will need to sort themselves out - either but cheaper, or rent.

You're actually in an extremely privileged position so asking someone else to fund yours and your family's choices is pretty crass.

What is your definition of essential works? If it is liveable, then you should pay and just delay refurbishment work (your option 3), rather than ask the seller to take the hit. Obviously if it has no roof then that's one thing, but if it's new kitchen / new bathroom and the current ones are old but serviceable, then i don't think it's very fair on the seller to ask them to reduce the price due to your circumstances as buying a second property. In owning two properties, you will have far more assets than the majority of people in this country, even taking the mortgages into account.

You are correct - it is wrong - thank you. We had this situation a few years back and the rules must have changed (I phoned the tax office for advice)

"...following yesterday's budget we're now facing almost 40K in stamp duty charges"

To be paying £40k stamp duty, since this is a second home, the house must be worth £525k.

If you had completed on that same £525k house before the budget then the stamp duty would have been £29,500.

So you are facing an extra £10k in stamp duty compared to what you would have paid before the budget.

As a pp said, since you are keeping the old property then maybe extend the mortgage on that property by £10k?

I would also point out that if you sell one of these properties within three years and go back to owning just one property then you will be able to claim back the extra stamp duty as the stamp duty for a £525k house that isn't a second property is just £13,750.

Frankly I’d speak to both you and their EA. They will already be geared for this given the news this week and some vendors may already have decided whether they are willing to adjust price if needed. It’s what they’re paid to do and often have to negotiate changes when lending rates alter drastically overnight, for instance.

The EA may state it’s a flat out no, but they may also indicate if there is wriggle room before you formerly ask the vendor.

So it's a second home, hence SDLT rising a lot. What sort of additional figure are we looking at? Around 10k?
I would contact the estate agent and ask if the seller will split the additional tax with you and deduct it from the sale price. To be honest, all agents, mortgage brokers, etc will have been dealing with these requests constantly since the budget. The seller would probably rather deduct £5000 than lose the sale. These tax increases will inevitably reduce prices a little, just like the reduction in SDLT increased them.

If I was the Seller and you asked me this, I would say No and relist the house.

Half a Million plus dollar house and you do this? Over an extra £10k in stamp duty?

Just no.

I think some people are getting confused with the CGT rules on disposal of non primary residences, where you can allocate one as primary or show you've used it as primary for a minimum time period.
Totally different rules but understandable that people confuse them.

Honestly if I was your seller, and you asked me to reduce because you didn't want to find an extra £10k to buy a second home, that's costing over half a million, I'd think you were a right cheeky f*cker and tell you where to go.

I'd have no sympathy for any pleads of financial hardship - you're in an incredibly privileged position!

I’d stick to your option 3.
It’s your choice to buy a 2nd home, nothing to do with the seller.

To pay 10k you have to earn 15k.
If they resist they might be faced with people dealing with increased mortgage rates, and the change in SDLT next year. Most likely also that 10k is unearned capital appreciation by the seller. The economic situation is worsening.
A bird in the hand etc.

How close are you to exchanging and completing?

If you only offered a couple of days ago that's very different to the sellers expecting to exchange on Monday for example.

I think you need to think about selling your current flat OP.

She's a second home buyer, this is self-inflicted

Option 3 (or 4).
Go ahead with the purchase. Find /borrow/ save /ask the family remaining in the flat for the 10k change the increase in stamp duty will cost you.

Based on your updates, you can ask OP. Your seller will either say yes or no. However, it's not your seller's responsibility to fund a second property for you, or home your mum or sister. Still, it's their choice, just be prepared for them to say no, and re-market the house.

Could you not just sell your flat to your mother/sister- even if at a very reduced value- so you only have one house?

Would you really do this though? It might collapse the whole chain, resulting in you losing your onward purchase. Resisting is a pretty big hassle, a big delay and there is no guarantee, with the market poor in most areas, that you would receive the same or a higher offer. You might receive something lower.
It seems as if some people just get angry because the OP owns two homes and therefore want to cut off their nose to spite their face.

The house is worth what it's worth. OP has the money. She just wants to spend it for renovating rather than buying.

This is no different than cheeky fuckers who drop their offer hours before exchange 'because they can'.

A house isn't 'worth what it's worth' though. It's worth what someone will pay. That's how markets and price discovery work.
I guess you would choose to pull out over 5K despite the risks of collapse of chain, hassle and expense of resisting, etc. That's a seller's prerogative.

If I was the seller I’d be telling you to do one sorry

What you mean is you are buying a second home. That is the only reason the amount of stamp duty has increased so much so quickly.

You can try asking if the Seller will reduce the price @Sammyjoegreen but they may decide to re list it instead so that’s the risk you take.

@KoalaCalledKevin offer was accepted only last week so we're right at the beginning of the process

@Sammyjoegreen in that case you might have more chance than if you were asking really close to exchange. It's probably still a long shot though, and will depend on how long they've been on the market, whether they had other offers, their general attitude to this sort of thing, their need to move quickly etc etc.