Legal question on property sale

SimonAH

Here’s an ethical / legal question for the eagle team....

What is the position if the purchaser of a property asks the seller to increase the selling price with the intention of having the seller refund the difference in cash once the sale is complete?

rjsterry

Why would you want to pay more stamp duty?

dhope

I'm not one of the eagles...

However, I would imagine it would depend on whether the purchase was funded by a mortgage or cash.

If a bank is lending to fund the purchase and the mortgage rate is linked to the LTV then would expect there would be some problem with making up a value in order to get a lump sum on top of a house. Otherwise you could surely buy a house worth 100k for 500k, take back 400k and then default on the repayments, losing the collateral (i.e. the house) but actually be quids in.

mossychops

Isn't this why mortgage companies make an valuation before agreeing to lend you the money?

If their valuation doesn't match your sale price they wont give you the loan.

Slow1972

Depends how comfortable you feel about defending allegations of fraud if your mortgage company finds out.

I would have thought that as part of the application you represent to them what the "purchase price is" I think they would probably argue that a "price" that includes a large kick back after completion is not the true purchase price and that it's actually the lower sum. Particularly if on the revised numbers they would not have agreed to provide you with the mortgage.

If it feels dodgy, that's because it probably is.

davmaggs

It's really a fraud against the mortage company and was really prevalent during the last boom. Lots of flats were bought down in the Thames gateway on the same principle, and it was a slick scam as they even collected rent on the places for a while and then vanished.

If it smells dodgy then it is dodgy, simple.

davmaggs

mossychops wrote:

Isn't this why mortgage companies make an valuation before agreeing to lend you the money?

If their valuation doesn't match your sale price they wont give you the loan.

Valuations aren't that precise. They are more like parameters.

cee

agree with above....

what legitimate reason would a purchaser have for doing that?

smells like money laundering.....

Wallace1492

It is unethical, probably illegal and highly dubious.

It is therefore used a lot by large multinational companies in order to avoid paying tax, hide profits and generally pull the wool over regulators eyes. This kind of practice has led us to where we are with the Banks taking the economy down the drain.

Go for it!!

navt

Simples. Up the asking price and keep the cash. Everyone's happy, no?

SimonAH

I should clarify.

I am a friend of the seller to whom the request has been made. The 'overpayment' is to bring the property sale price over a minimum mortgage threshold for the buyer and equates to 2K.

It's a convenience transaction but I was wondering if the seller would be breaking rules by agreeing.

dhope

Oh, that's far less fun, it almost sounds reasonable

DF33

get the seller to do an improvement to the property to the value of 2k (new boiler, etc). increase the asking price to reflect, tell mortgage co boiler broke down and rather than you sort it when moved in, you agreed to the seller doing it to save your inconvenience and improved the property value.

Paper trail, legal, you get the mortgage and an asset of £2k to boot.

alan_sherman

Minimum mortgage threshold? That's a new one on me! So they are playing with loan to value and some minimum mortgage threshold? Tell them to sort their own finances out - the sale price is the sale price.

If they want to get a bigger mortgage from the bank then they can, that is purely up to them.

rjsterry

I would have thought that £2K is well within the margin of error of a mortgage valuation.

clarkey cat

I like DF33's suggestion - perhaps the asset could be a shoebox with £2k in it left in the cupboard under the stairs

stimpy_76

As well as being the offence of fraud (on the mortgage company, imprisonable offence) it is also a common method of money laundering (contrary to the Proceeds of Crime Act 2002) which is also a criminal offence.

I'm sure that the Serious and Organised Crime Agency would be interested.

Please bear in mind that your identity IRL is traceable through this forum.

Note that conviction of either offence would likely give rise to confiscation proceedings - I'm sure you'll enjoy police Financial Investigators trawling through your bank accounts, savings accounts, credit cards etc for the past few years. You couldn't stop them (and you probably wouldn't even be aware they were doing it - they get the info straight from the banks and you don't get notified).

Worth the hassle? Probably not.