Selling a property can be a complex process, there is a lot of administration to sort and there are lots of legal processes that need to be completed before the transaction can be completed. The process becomes a little more complicated if the property was purchased using a help-to-buy scheme. In this blog article we will look at the different schemes and how they change the sales process.
Help-to-buy: Equity Loan Scheme
Under the help-to-buy equity loan scheme someone who purchased a property would put down at least a 5% deposit and the Government would lend them up to 20% (40% in London) of the property value as an equity loan. Typically, this loan attracted no interest for the first 5 years of the loan. The loan ultimately only needs to be paid back once the property is sold, although the loan can be paid back at any time if the finances are available. When selling a property which was purchased using an equity loan scheme the seller would need to contact the National Post Sales Agency who will appoint an independent valuer who will carry out a full market appraisal for the property. This is the lowest price at which the property must be sold on the open market. Clearly the property can be sold at a higher price than this. The amount that needs to be paid back is the percentage which was borrowed of the sales price. So, if 20% was borrowed and the property sells for £400,000 then the seller would need to pay £80,000. This is invariably more than was borrowed in the first place due to the inflation of property prices. The sale cannot complete until the equity loan has been repaid.
Help-to-Buy: Shared ownership
In a shared ownership property, the owner really only owns a percentage of the property and a 3rd party such as a housing association owns the remaining portion of the property. There are, then, essentially two owners. The seller will need to inform the 3rd party owner that they wish to sell. The 3rd party then has either 4, 8 or 12 weeks, depending on the agreement, to find a buyer themselves. The 3rd party can, if they want, buy the remaining shares themselves. The sale price has to be determined by an independent Royal Institution of Chartered Surveyors registered surveyor. The share of the property being sold must be based on that valuation and it cannot be sold for less. If the seller does not own 100% of the property then the sale must be done on a shared ownership basis. In this case the purchaser must meet all the shared ownership criteria and must purchase at least the equivalent share as the seller has.
Help to buy schemes helped many people get on the property ladder, but they do come with some added complexities when it comes to selling the property and these will need to be considered when putting the property up for sale.
