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In the current economic climate it is almost a foregone conclusion that it will be difficult to sell a property. There are far too few buyers out there willing to commit. When there is a willing buyer then they will want to haggle over the price and they may have difficulty then getting a mortgage.
According to various surveys the number of sale transactions going through is down by a massive two thirds. Just a few years ago the Government were pressing for new homes to be built at the rate of 244,000 per annum. Industry experts now predict that starts of new homes in 2009 may be just 60,000.
It is, however, not all doom and gloom. The property market has been in the doldrums since September 2007. During this time the vast majority of people have got on with their lives in the same way that they have always done. People have grown up, left home, got married, had children, those with children have had more and some people have got divorced. All these are classic drivers of the property market. Therefore there is a large repressed demand for people to buy a home while at the same time the market has got smaller. As soon as the market moves a bit then it should lead to a relatively large amount of activity.
For those keen to sell their property, in the meantime, there are a number of alternative options worth considering:
Lotteries
Typically the seller runs a web based lottery in the hope that enough tickets will be sold to more than cover the value of the house. However, these schemes are a bit dubious. There are a variety of potential problems with these involving Gaming Laws. The Law Society has recently warned solicitors to be very careful of getting involved with these. If you want to consider this then take advice, not just from a solicitor specialising in Property Law but also in Gambling Law.
Auctions
This is not a new idea but one which is really getting more popular. When the hammer comes down then that is effectively “exchange of contracts†and the property is sold. It is a great way to get rid of a property very quickly. Traditionally it was a good way of getting rid of a property that had problems that no one would buy but it is becoming more and more usual for desperate sellers to now use this.
It is also the way for a buyer to get a tremendous bargain. It is not unusual for a property to be sold cheaply at auction and then to be let out at a return of 15 per cent. Compare that to the current return on money left in a building society or Icelandic Bank. Anyone wanting to sell at auction should seek out an experienced firm of estate agents and auctioneers and be very careful about setting the reserve price. Set it too high and it might not sell. Set it too low and you have wasted your time.
BOGOF
Buy one get one free. Some developers are desperate to clear their stock to keep the bank at bay. If the right offer is made at the right time then great deals can be had.
The "Save a Deposit Scheme"
This is being used successfully by a developer in Milton Keynes on a site in Wolverton Park. The idea is that the buyer pays a very small up front payment, £750. They then move in. They then pay their deposit in instalments over a year. Therefore instead of paying rent they are paying a similar amount that adds up to their deposit so this scheme is very painless for a young buyer. After a year they apply for a mortgage and complete their purchase. This is a really good imaginative scheme. The agents are Knight Frank.
Part Exchange
This is a scheme that is mostly run by developers but there is no reason that private individuals should not use it. In order to “break the chain†the seller of the more expensive house buys the cheaper one. That way at least some cash is released to the seller. Usually the Seller buys their buyer’s property but there is no reason why it shouldn’t be a cheaper property further down the chain. If a developer is doing this to sell a new house then there is a relief whereby Stamp Duty Land Tax is not paid by the developer but this relief does not apply when second hand properties are involved. SDLT is a very complicated tax and nothing should be assumed about it. Take expert advice.
Shared Equity
Again, this is a scheme mostly used by developers but there is no reason why private individuals shouldn’t do it. If a buyer is short of money to buy a property then the seller can allow the buyer to complete but without paying over the whole purchase money. A fixed amount of money or, say, 20 per cent, could be deferred for five years or until the buyer sells the property. The 20 per cent share would be secured by way of second charge on the property. There is the risk that the buyer may get into financial difficulty and get repossessed by the first mortgage lender in which case the holder of the second mortgage may get nothing.
Price Promise
Again, a scheme that is common with developers but no reason why a private individual cannot use this. To persuade the buyer that it really is the market price and they should buy now, rather than wait for prices to drop further, the seller lodges, say, 10 per cent of the sale price with their solicitor on the basis that if house prices fall over the next year as judged against one of the recognised house price indexes then the fall in value will be paid out of this.
Some of these schemes involve a variety of complications and careful drafting of legal documentation and therefore it is important that advice is sought from a solicitor who is used to dealing with such matters.
By David Marsden, Partner - Real Estate Group, Matthew Arnold & Baldwin Solicitors (www.mablaw.co.uk)
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