Exchange with delayed completion (purchase enquiry - not lettings!)

[Diggy]

Hello.

 

I have had an offer to buy my flat, the buyer wants to buy now but complete in a number of years (2-4). The idea being that in the meantime they can profit through any price rises, and I get the price I need now that I may not achieve on the open market.

 

During the period of time before completion they would assume all legal responsibility for the upkeep and mortgage payments on the flat.

 

Has anyone heard of this before and what risks should I be aware of?

 

This company http://www.guaranteedhomesales.co.uk/how-it-works/ seem to offer exactly the same option.

 

Any advice appreciated!

[Thegreenpimpernel]

The idea makes the hairs on the back of my neck stand up.

 

Legally obliged to pay the mortgage right?

 

So the mortgage is in your name still?

 

1)Legally obliged doesn't mean they'll pay it. They could do a runner, have no means to pay it (obliged or not), or maybe they could go bankrupt and leave you with arrears.

 

2)What if they destroy the house in an uninsured event? I know someone who let an 'old friend' live in his house. 'Old friend' burnt the house down while fiddling the electric meter to grow a huge crop of weed!

Guess what, the insurance company didn't pay up, house was derelict, sold at auction with a £30,000 mortgage short fall... ...for which the bank took my friends other house!!!

 

Unless a solicitor can make the above water tight, the words 'bargepole' and 'not' spring to mind.

[MrShed]

Terrible terrible idea.

[Diggy]

Thanks for the replies.

 

This kind of echoes what I thought!?

 

The proposed plan is this.

 

Mrs A want to move into our flat but cannot obtain the relevant mortgage, so she has employed Mrs Buyer to help her.

 

Mrs Buyer will pay us a cash sum (tbc) to leave the property and we exchange contracts for a sale at an agreed price. The cash sum is equal to amount we would have left over by selling the conventional way.

 

Mrs Buyer will then legally assume (via solicitors) all responsibility for the flat. The mortgage, bills, insurance, upkeep, everything. Whilst letting the property to her client Mrs A. During this time, WE will legally own the property but have no legal liability to it.

 

At the end of an agreed period of time, (we are thinking around 2 years) we complete on the sale at the pre-agreed sum and Mrs Buyer then sells it straight on at the current value.

 

The reason for selling in this way means that we sell the property at a price we would not achieve on the open market, Mrs A get the home she wants, Mrs Buyer banks 2 years of equality.

 

It all sounds good, but I cannot see how Mrs Buyer can legally assume full liability to the property when we still own it?!?

[MrShed]

She cant. Its as simple as that. Its just not possible. She cannot mortgage a property she does not own, or insure a property she does not own.

 

Its a ludicrous scheme and I would advise to stay well clear.

[Diggy]

She cant. Its as simple as that. Its just not possible. She cannot mortgage a property she does not own, or insure a property she does not own.

 

Its a ludicrous scheme and I would advise to stay well clear.

 

She wouldn't need to mortgage it, she told me she can arrange with my lender, via a solicitor to take a liability for MY existing mortgage. As for the insurance, again, she wouldn't insure it, she would take liability for paying the freeholder for their business insurance?!

 

I think my course of action is going to be to have her put in writing precisely what her proposal is and detail what safeguards will be in place. I will then take this to my solicitor, my mortgage advisor and an impartial estate agent for their views on it. I agree it sounds very 'suspicious' however I am in a situation where I cannot afford to miss out if this is a genuine opportunity!

[mariner51]

First reaction is some sort of fraud / con is involved.

Either sell out right at current market value, stay put & wait for upturn or rent out for short term.

 

If it sounds too good to be true, it prob is.

 

You really want to allow a complete stranger to take resp for paying YOUR mortgage when the dubious prop Ins arrangements would prob invalidate mortgage?

[hammyhound]

I think once you talk this over with your solicitor you will probably find he will advise you to stay clear - something is not right here.

[Surfer01]

I woudl not entertain the idea. What woudl happen in the event they default on the mortgage payment or the servcie charge as legally you are still the owner and you coudl end up being bankrupt.

[Aequitas]

There are occasions when unusual arrangements are called for. However, if you are offering a residential property for sale on the open market you must avoid being tempted to go in for a complicated or unusual deal. "White dog for a black monkey" deals are fine if you are are selling an old car, but should be avoided in property transactions. Keep it simple. The more desperate you are to sell the more important it is to keep it simple.

[NewSAHD]

There are occasions when unusual arrangements are called for. However, if you are offering a residential property for sale on the open market you must avoid being tempted to go in for a complicated or unusual deal. "White dog for a black monkey" deals are fine if you are are selling an old car, but should be avoided in property transactions. Keep it simple. The more desperate you are to sell the more important it is to keep it simple.

 

Never a truer word - and, tbh, every poster before is pretty much making the same point!

 

Diggy, you say "I agree it sounds very 'suspicious' however I am in a situation where I cannot afford to miss out if this is a genuine opportunity!"

 

Sorry to ram home the point, but on the face of it, it isn't an opportunity worth considering

 

To give some indiction of how it can go wrong, please have a read through:

 

http://www.consumeractiongroup.co.uk/forum/showthread.php?288422-advice-needed....-landlord-not-paying-mortgage!!&p=3249020&highlight=

 

and

 

http://www.consumeractiongroup.co.uk/forum/showthread.php?289370-Concerned-about-landlord-s-mortgage&p=3248875&viewfull=1

 

I recall there are other posts on this type of subject here and elsewhere too

 

Curiousity has got the better of me, as you also say "This company http://www.guaranteedhomesales.co.uk/how-it-works/ seem to offer exactly the same option."

 

The web page itself appears to give no 'physical' contact information at all, which would tend to worry me, plus, Companies House shows no company by the name of 'Guaranteed Home Sales' either - and, as legitimate as 'they' could well be, 'they' could well be just a relatively smart web page, with little of substance, ethics, or morals behind them

 

Did you find their details by chance, or did the prospective buyer etc direct you to that website in anyway?

 

Wonder if there is any link between 'Guaranteed Home Sales' and the following companies in any way whatsoever to:

 

04431657 D GUARANTEED HOME LOANS LIMITED Dissolved

04377618 D GUARANTEED HOME LOANS (KENT) LIMITED Dissolved

04940862 D GUARANTEED INVESTMENT CONTRACTS, LTD Dissolved

02547290 L THE GUARANTEED INVESTMENT PROPERTY COMPANY PLC in Liquidation

 

That's all just a cut and paste from the Companies House website btw

 

'Guaranteed Home Sales' could well be legitimate, of course - and not really suggesting they are not, just simply pointing out the real problems that have been highlighted here already on the CAG forums

 

Doubtless there are similar forums elsewhere, with similar stories, so...

Keep it simple.

? Hope all that helps too

[Thegreenpimpernel]

"Curiousity has got the better of me"

 

Didn't it just.

 

That was good.

[NewSAHD]

"Curiousity has got the better of me"

 

Didn't it just.

 

That was good.

 

530am - and still I laughed, cheers !

 

(But there is a serious side to all this, of course.

The more information Diggy has now, the less 'pain' there may be later, perhaps)

[Diggy]

Thanks all for the replies/advice.

 

I too looked into the different people online offering these services and found there websites somewhat lacking in information as to who they are and where they are based, although there are a couple of more 'transparent' companies I have now found.

 

Despite all the advice against this I am going to continue investigating this offer. If for no other reason, at the end this thread may help someone else who finds themselves in my position.

 

I am expecting a full and concise written offer, explaining how this will be made legal and safe, I'll be back then!

[Aequitas]

Whatever you do do not sign anything without taking legal advice.

[NewSAHD]

Diggy, I've not been around this week, otherwise I would have replied before now. Whatever you decide please DO follow the advice given above....

 

Also, bear in mind that I recently had an exchange with someone who had found themselves in the same boat as you - although only found out about it after the pretty much worthless 'papers' had been signed some time earlier. Best I can do is copy and paste their recent reply to me (edited to remove personal information etc) which read:

 

"It hasn't gone well at all, (we) went to court last week, and the house was handed back to Building society.

(We) have asked for an extension till (2 months from now) which was granted.

(Our) Barrister has basically said (we) haven't got a case because the "landlord" never registered the lease so its not worth the paper its written on, and (we) are not entitled to legal aid so would have to pay and if (we) lose it would cost (us) alot of money which (we) haven't got ,so (we) are looking for some where else to live."

 

Horrible situation for them to find themselves in - and now they have lost their home too

 

If only they could have come to CAG, or taken proper legal advice, or similar, before signing

 

Good luck in whatever you decide - and please do post again to say how you get on too

[coez]

Diggy, it's always better seeking advice from a competent person rather than getting it from someone down the pub (read forum). This seems the case here. No-one asks the relevant questions: why are you considering this? Do you you not have much equity in the house and the only other offers you get require you to pay the difference to 'sell' your house? I assume this may be the case, which is where I ask - what are the pros and cons?

Pros: you get your equity now

you have security ie a house

Cons: the mortgage is still in your name

 

I assume your buyer will use a solicitor to exchange (and pay stamp duty) with completion in 2 years? I'm sure any decent solicitor will write into the contract that if one mortgage/insurance/any other payment is missed you get the house back and keep the upfront money... In which case you're back at square one plus some cash.

 

In theory, I don't see the problem and if others tell you not to consider this then ask them to pay your shortfall. Its easy for someone to advise to you not to do something when they are not aware of the details and have no interest - instead detailing all conceivable what if scenarios while you suffer. Why not give this person the benefit of the doubt.

 

At the end of the day its an issue of trust and experience. If he seems like an honest guy, ask for references - from his solicitor (has he done deals like this before) and previous sellers (have they had any problems). If you and your buyer are happy with the deal then draw up the terms and tell your solicitor to go for it.

Just make sure you do use a solicitor.

[NewSAHD]

Diggy, it's always better seeking advice from a competent person rather than getting it from someone down the pub (read forum). This seems the case here.

 

Rarely come on to CAG now, but saw the post, above, and thought...er, hang on a bit

 

CAG seems, to me, to serve a useful purpose at times, best not to knock it too much. So, with that in mind, why did you come here in the first place? Did you find CAG to be generally quite useful when you needed assistance too? Hope so

 

The pub analogy is probably a useful one though, save that most here seem to make it clear they are NOT lawyers (unlike a pub, perhaps ) and most here certainly seemed to say 'seek proper advice' too. That said, I recall Aequitas may have a 'legal' background out in the real world though, but that's by the by

 

My relatively limited experience of CAG, however, is that a number of the posters on CAG are rather more competant than you appear to give them credit. CAG has certainly helped me when I needed it, which is probably one of the main reasons I visit CAG when time allows

 

At the end of the day its an issue of trust and experience.

 

Pub banter, or not, there's clearly a wealth of experience to be gleaned from forums such as CAG - and reading around the subject can do the OP no harm; they can then, perhaps, make a more informed decision too. That sounds quite a reasonable thought too

 

Incidentally, why did you come to CAG in the first place - and what then made you visit this particular topic all this time after? And I'm curious as to whether you have any connection whatsoever in companies that operate in this field. Please accept those queries in the spirit of CAG too, which is largely anonymous anyway, but I trust you will appreciate the reason for asking

 

At the very least, I now know that to "give a black dog for a white monkey" is, according to google, 'an old naval way of expressing a fair exchange - a quid pre quo.'

 

And as Diggy's last words were "I am expecting a full and concise written offer, explaining how this will be made legal and safe, I'll be back then!" , well, should Diggy ever return I'd be curious as to the outcome of that too...

 

Cheers then and bye for now

 

[Steve__M]

If you investigate, I'd be interested in the following:

 

What is the difference between their offer and the open market valuation?

Do they ask for upfront fees?

Do they insist that you use a solicitor selected by them?

Do they reserve a right to refinance your house prior to completion?

What would you do if they move tenants in who proceed to damage the house?

How much financial backing do they have? Could they survive a house-price drop of 20% or an interest rate rise of 1-2%?

 

I may only be a thick twit on a forum, but it seems obvious that while such schemes will work as long as interest rates are low and prices are stable or rising, if prices drop significantly or if the company is unable to raise finance in the future then it could go bust. If it goes bust you are suddenly left with the house back in your hands, potentially with an unfavourable mortgage and dodgy tenants.

 

In the meantime if you are applying for a mortgage on another property, then being involved in this sort of deal would surely reduce your chances of getting one.

[Ed999]

I am expecting a full and concise written offer, explaining how this will be made legal and safe, I'll be back then!

 

 

Simple answer: it can't be made safe or legal.

 

As you have a mortgage on the property, the arrangement which you propose could only be legal if you obtain the written permission of the mortgage lender, beforehand; but the lender is never going to agree, because the scheme proposed is hair-brained.

 

As you will have to pay rent on your new accommodation, you clearly will not have enough money to pay your current mortgage as well. This makes the proposition a non-starter from the point of view of your existing lender.

 

If the so-called buyer could genuinely afford to pay your existing mortgage, that buyer would be in a position to immediately buy the property now, and would not be proposing to complete the purchase in three years time.

Edited May 24, 2011 by Ed999