Buying a house and having some problems with stamp duty

[m3jappa]

Right i,ll set the scene.

House for sale we are interested in. We (after some negotiation) offer 273k and the seller will pay all the stamp duty on our behalf.

Everyone seems happy.... or so we thought....

We receive a letter from our solicitor explaining that he must tell this to the lender as its considered an incentive which it is imo.

So i speak to the bank who tell me that the house will now be viewed by them as being worth 265k (even though the valuation at 273 stacked up) and that we must now come up with the 8k in stamp duty!. So i ask whats the incentive if i have to pay it? I,m told there is no incentive? and that we have no choice and theres no way round it.
Soliciter basically told me the same as the bank.

So now we are a little stuck, we cant afford (or would really rather not afford) to pay the 20% deposit and the 3% stamp duty. Leaving things in mid air. We only went for this place which is at the top of what i can sensibly afford because its had 25k knocked off an already reasonable price and he was going to pay stamp.

The estate agent has suggested that we keep with the 273 figure, we then pay stamp duty and then get the seller to gift us the money back.
Sounds okay to me but surely this is just a deal behind closed doors? maybe not legal? not sure of the tax implications as i am sure you can be gifted something like 15k tax free per year.
Either way i dont want to break the law or defraud anyone and i would also have to trust this seller.

Anyone have any ideas? this is the 4th house we have tried to buy, the other 3 have fallen through for various reasons beyond our control, this is by far the best place and we don't want to lose it but i feel it would be foolish to 'do' all or most of my money on it.

[Alex]

The seller cannot "pay the stamp duty", but they can discount the sale price by the equivalent amount. So what's the problem?

[Gareth79]

Alex said:

The seller cannot "pay the stamp duty", but they can discount the sale price by the equivalent amount. So what's the problem?

Presumably the OP doesn't have the £8k cash laying around so was effectively hoping to borrow the stamp duty as part of the mortgage. Because the vendor was willing to discount it by the £8k the lender believes that it couldn't have been worth that in the first place, so is dropping the amount they will lend to try and prevent it happening.

The OP could say to the mortgage company "ok, we aren't going to do that now" and sell at the original price, but I think "cashback deals" must be declared and it would probably amount to some sort of fraud. The agent won't care, he's just after his sale.

Edited by Gareth79 on Monday 7th December 18:08

[scotal]

Alex said:

The seller cannot "pay the stamp duty", but they can discount the sale price by the equivalent amount. So what's the problem?

Errrrrmmmm its quite common for the seller to pay the stamp, especially where a house is sold just above the sdlt threshold and the seller might pay the difference between the stamp at the threshold and the increased stamp on the higher amount.

If the seller were to discount the price by £8k, then the stamp required would actually drop, albeit marginally.

[m3jappa]

Gareth79 said:

Alex said:

The seller cannot "pay the stamp duty", but they can discount the sale price by the equivalent amount. So what's the problem?

Presumably the OP doesn't have the £8k cash laying around so was effectively hoping to borrow the stamp duty as part of the mortgage. Because the vendor was willing to discount it by the £8k the lender believes that it couldn't have been worth that in the first place, so is dropping the amount they will lend to try and prevent it happening.

The OP could say to the mortgage company "ok, we aren't going to do that now" and sell at the original price, but I think "cashback deals" must be declared and it would probably amount to some sort of fraud. The agent won't care, he's just after his sale.

Edited by Gareth79 on Monday 7th December 18:08

exactly this, this idea was we added 8k to the loan to cover the cost of stamp duty. we were happy to do this as we believe the house to be a good price and as such wasn't a bad idea.
If i had the extra cash kicking about i,d pay it as obviously it would mean we wouldnt have to borrow that, but as we are coming up with the best part of 6k i think its wise to leave myself some money to fall back on.

Doing a smaller deposit is also a no no as it would mean we would no longer be entitled to a good mortgage rate.

Looks like i,ll be out begging this weekend lol.

[scotal]

m3jappa said:

exactly this, this idea was we added 8k to the loan to cover the cost of stamp duty.

Hang on, a minute ago the seller was paying the stamp, now you are, thorugh borrowing extra, except that you've borrowed right up at the LTV threshold, which means you've inflated the price to get the borrowing. No wonder your solicitor is having kittens.

[m3jappa]

well yes i guess thats correct.

We offered 265k originally and asked for them to pay 2% of the stamp duty.
He said no way couldn't afford it, so i said ok what about 273k and you pay all of the stamp duty.

House was valued at 273k

Maybe i have been totally naieve but i thought what we were doing was acceptable? the house was originally up for 290k at the very start of him selling and i thought we did a 'deal'

I see what your saying about pushing the prices up, thats exactly what the solicitor told me. Apart from that i see no problem, we get the house, seller gets a sale, inland revenue get their stamp duty, bank gets their money back.

So when a seller agrees to pay the stamp duty, under what premise does that work?

[scotal]

m3jappa said:

We offered 265k originally and asked for them to pay 2% of the stamp duty.
He said no way couldn't afford it, so i said ok what about 273k and you pay all of the stamp duty.

House was valued at 273k

Maybe i have been totally naieve but i thought what we were doing was acceptable? the house was originally up for 290k at the very start of him selling and i thought we did a 'deal'

Irrespective of what the house is valued at (and i know that kind of makes a mockery of things) in the banks eye's they've lent you the money to buy a house worth £265k and then also lent you the stamp over and above that. From their point of view they are lending more than the 80% ltv you mentioned above, they are lending 83% which pushes you into a different mortgage bracket.

m3jappa said:

I see what your saying about pushing the prices up, thats exactly what the solicitor told me. Apart from that i see no problem, we get the house, seller gets a sale, inland revenue get their stamp duty, bank gets their money back.

From your point of view, no there's no problem, but the lawyer would (as he has) have to tell the lender that there is an incentive, and I believe the legal chaps get a form now to fill in, and equally he would have to inform the land registery about the transaction with figures on that weren't quite right. From his point of view, he would be signing docs that weren't right, and that could see him in trouble.

Of course the most likely way of that being found out is if you defaulted on your mortgage.
you might say that will never happen, but he isnt going can't afford to think like that.
(Remeber the other sides ssolicitor has to sign the same figures, so thats 2 lawyers who may not want to lie of your behalf. 9you may not see it as lying, the lender would)

m3jappa said:

So when a seller agrees to pay the stamp duty, under what premise does that work?

One where the borrowing required to purchase the house is not going to be pushed over an LTV threshold in the way you've done it. i.e. had you been borrowing say 50%, and then the bank downvalued you by 8k, it wouldn't have mattered.

[m3jappa]

Thanks scotal thats explained it better.

So i guess that the only options i have are

Get seller to knock a bit more off of the price and pay stamp duty myself
or
Just pay it myself

[bogwoppit]

m3jappa said:

Thanks scotal thats explained it better.

So i guess that the only options i have are

Get seller to knock a bit more off of the price and pay stamp duty myself
or
Just pay it myself

Pretty much. For exactly this reason, I can't understand why people play this cat and mouse game of stamp duty in the first place. Since you can't get away with paying less in deposit, and it makes the overall process more expensive for both buyer and vendor (more SDLT, more estate agent's fees). Better to just discount the house by the equivalent amount.

The option of "gifting" the equivalent sounds dodgy, and besides, the mortgage company may not stand by the original valuation because they now have "better evidence" it is not worth that amount.

Edited to clarify: so the lender might decide they are only going to lend you 80% of 265k no matter how much you buy for.

Edited by bogwoppit on Monday 7th December 22:20

[m3jappa]

i genuinely thought we were getting a good convenient deal at the time

You live and learn a i suppose, i guess we will have to see if we can get any discount on the 265k to keep things going smoothly and slightly lower our initial outlay (which is the whole problem).

[VX Foxy]

I'd see it as a blessing in disguise. You need to cleanse your mind of the notion that it's a £273k house. It's (for the moment) a £265k house.

[m3jappa]

VX Foxy said:

I'd see it as a blessing in disguise. You need to cleanse your mind of the notion that it's a £273k house. It's (for the moment) a £265k house.

I think you may be right.

We have not heard anything back from the estate agent or the seller now since this was discovered. That to me is a good sign, a sign that the seller is considering what to do. I know they aren't going to want to pull out as they are having a job re location and are committed, both of us have had formal offers turn up, house took nearly 4 months to sell and we are first time buyers with no chain.
For their house to go back on the market now would cause them huge problems- what if it takes another 4mths to sell?

I am thinking that the only way to go is to knock some off the 265 meaning slightly less deposit and less stamp duty.

When we originally offered 265k we asked for them to pay 2% of the stamp. They immediately said yes to 265 but said they could physically not afford the stamp duty on their new house and on ours. In hindsight i should have said 'ok lets say 257k and we pay all the stamp' instead of me saying ok 273k and you pay it.
naievety or even possibly excitement meant for that second i didn't think properly/quick enough. Afterall i still cant believe that we (should hopefully) be getting a house like this, i could never have imagened it! Big 4 bed, double garage, parking for 4-5 cars! It really is beyond what i could imagine myself getting for a first bloody house!

I,m hoping thats what now comes back as otherwise we are all a bit stuffed. Even on that its going to be more of a strech for the initial outlay but it would bring my total borrowing down by about 12 or 13k so like said above 'a blessing in disguise'

[VX Foxy]

m3jappa said:

I know they aren't going to want to pull out as they are having a job re location and are committed
...
we are first time buyers with no chain.
...
For their house to go back on the market now would cause them huge problems- what if it takes another 4mths to sell?
...
I am thinking that the only way to go is to knock some off the 265 meaning slightly less deposit and less stamp duty.
...
In hindsight i should have said 'ok lets say 257k and we pay all the stamp'

Bearing the above in mind I'd be thinking 250 (plus some £ for chattles to soften the blow) and don't worry about SD.

[scotal]

VX Foxy said:

Bearing the above in mind I'd be thinking 250 (plus some £ for chattles to soften the blow) and don't worry about SD.

That will excite the soliciotr even more. HMRC take a dim view of fixtires and fittings payments at or around the sdlt thresholds. Then can demaqnd to see original purchase receipts for any goods you have bought under seperate negotiation, and if they either dont add up, or if HMRC decide you are trying to avoid sdlt liability they could demand full payment of a higher level of stamp, and possibly fine you.

Not brilliabnt advice TBH.

[VX Foxy]

scotal said:

Not brilliabnt advice TBH.

The advice was not 'take the piss and offer 5k for the rotten shed'.

It was sound advice to offer reasonable £ for some bits and bobs.

TBH

[m3jappa]

Well i'm not happy tbh, i told the estate agent my thoughts today, he 'reckons after speaking to the vendor' that theres no way its going lower than 265k at all, apparantly the guy has already had to borrow more to get into his new place. I have my thoughts in place that he hasnt even told him of our new offer because he wants 273k on the land registry, making it look like the house sold for more and as such propping up prices.

He has offered to pay the money behind closed doors which tbh i am not interested in, if anything because A. the solicitor isnt stupid and will not believe we are now paying 273 AND the stamp duty, effectivly bringing out total outlay up to something like 281k , and also because i dont fancy lying.

So it looks like i,m going to have to find the stamp on 265, it means we pay out another 5k overall i think it works out to be which isn't the end of the world and will obviously lower our total borrowing, i guess i,m not loosing out, its just the initial kick in the teeth i loose some current cash flow.

Oh and remind me never to buy a house again, lol. The whole process has taken 6 months to get this far! The first three fell through for various reasons! Jokingly i said to my g/f that if this one falls through i,ll buy a lambo and live with my mum and dad forever lol. I really am sick and tired of it all now.

[VX Foxy]

If I was buying now there's no way on this earth I'd be accepting an effective price increase. The vendor must know he's in a very precarious position and is probably stting himself. The EA knows this and is puffing up his chest to unnerve you.

DO NOT underestimate the strength of your position.
You hold all the cards and YOU should be calling the shots - not the EA.

[Dave_ST220]

VX Foxy said:

If I was buying now there's no way on this earth I'd be accepting an effective price increase. The vendor must know he's in a very precarious position and is probably stting himself. The EA knows this and is puffing up his chest to unnerve you.

DO NOT underestimate the strength of your position.
You hold all the cards and YOU should be calling the shots - not the EA.

I doubt the vendor is stting himself at all, you only hold all the cards IF you are willing to loose this property, if you aren't then you have two choices......

[VX Foxy]

Dave_ST220 said:

VX Foxy said:

If I was buying now there's no way on this earth I'd be accepting an effective price increase. The vendor must know he's in a very precarious position and is probably stting himself. The EA knows this and is puffing up his chest to unnerve you.

DO NOT underestimate the strength of your position.
You hold all the cards and YOU should be calling the shots - not the EA.

I doubt the vendor is stting himself at all, you only hold all the cards IF you are willing to loose this property, if you aren't then you have two choices......

Did you read the thread? Vendor is relocating. Not selling will cause him all kinds of headaches I would have thought. Perhaps his employer will pay his mortgage indefinitely...?

ETA Why wouldn't the OP be 'willing to lose the property' - doesn't sound like it's the kind of bargain you got.

Edited by VX Foxy on Thursday 10th December 11:59