Managed to sell a nice small flat a couple of weeks ago. An offer of £92k was accepted.
The EA said the buyer was financially secure.
But a couple a days ago the EA's have informed us that the buyer cannot get a 100% mortgage and have said that the lenders will require a deposit. The EA's have informed us that we need to offer the buyer a 'gift' of £4k, which will secure the deposit and the EA will advise the buyer's lenders that the property offer agreement is £96k.
My question is, has anyone heard of such a thing? Is this all above board and legal?
Haven't spoken to the solicitors about this yet, just a load of law books piled on the floor around me! The offer acceptance letter from the EA's came in yesterday, with the figure of £96k,when I haven't even said I was going ahead with this 'gift' thing!! Bloody EA's have been driving me up the wall!! Surely they can't act in an illegal way?
Don't imagine your solicitor will go along with this , I wouldn't, as its bordering on mortgage fraud. This has been the problem in the news lately, overvaluation so obtaining 100% mortgages by the back door. Why should you put your neck on the block by what is effectively lying, ,your EA will deny all knowledge of it if there ever is an investigation. My advice would be to say no and make your EA do his job properly. Anyway as I undersatnd it mortgage lenders are not accepting vendor gifted deposits now.
This was a common backdoor practice back in the 80's and 90's when mortgages were more tightly regulated. It is not exactly illegal but you need to tread careful as the mortgage company could have cause to take legal action against you because the money they are lending to the mortgagee(s) could be at risk if they get into financial trouble and walk away from the property. If they can't afford to buy your flat then in today's financial market they can't afford to buy it's as simple as that. Mel.
What happens if buyer's lender gets a valuation which says its only worth £92K? Other than that, technically you would be a party to a fraud and although it's unlikely to come to light, you never know... Don't do it!
If a buyer's solcitor is aware of a gifted deposit he has to tell his client that the client has a choice either:
a). To refuse to allow the solicitor to tell the mortgage lender about it, in which case the solicitor then is professionally bound to cease to act for the client and to tell the the lender that for professional reasons he is unable to act for the lender (so the lender wonders what's going on but hasn't actually been given any details) or
b). To authorise the solicitor to tell the lender, in which case the lender may or may not amend or withdraw its offer.
Unless the lender has been told and is happy to proceed then the seller is an accessory to a mortgage fraud.
As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients
