Deferred Sale

[Hecateh]

Just browsing around Zoopla (as you do) and came across something called a 'deferred sale'.  Started following links and came upon this site http://realpropertysolutions.co.uk/index.htm  

It seems that they buy the property - with no fees to the seller - and at market value or above.  The seller gets between 50 and 75% up front and interest on the remainder until a set period is up (eg 5 years) and the agent lets the property out.  They are happy to let the property to the seller.

This seems to mean I can get 75% of the value of my property and then still live there paying rent until I have built my new property at which time I move and they let my old property to someone else.  

When things look to good to be true I know that usually they are but this does seem a good deal

Any thoughts anyone.

 

[Stones]

Quite clever actually, they buy a property for below market value, so get a far better return on their money in terms of rental income. They sell the property several years down the line by which time it has appreciated in value sufficiently (or so they hope) to pay off the remaining capital chunk to you and leave them with a tidy profit, as I'm guessing a share in any uplift in value is not included.  Either that or the uplift in value allows them to borrow more against the property (enough to pay you off) and maintain their yield through continuing to rent it out.

[Hecateh]

In their blurb they say they pay above market value BUT on reading further they operate in Surrey and not in my 'deprived' area of Yorkshire.  So even if they do pay above market value they are still likely to get a huge return.  Much less of a guarantee in an old pit village  

 

 

[MikeSharp01]

Hmmm - Never heard of this in the form here - I will ask my 'local' mortgage market expert and get back to you.

[SteamyTea]

Do they charge fees for this fantastic service?

As they say in 'All The Presidents Men'. "follow the money"

[ragg987]

Tread with care and maybe ask to speak to previous customers. There was something in the news about similar schemes (I am not saying it this company was invloved) where a reasonable offer was made, then once seller had committed and was well into the sale the company dropped the value. Buyers had committed a lot by this stage e.g. were in a chain, had paid solicitors etc and so felt trapped to take the lower offer.

[MikeSharp01]

Ok have some more info and the news is not good - so it probably is too good to be true.

 

I can find no regulation details on the we site so either they are not regulated or have still to update their site. They do say that they do their best to rent back to the property owners but cannot guarantee this - and perhaps here lies the rub because - if they do rent it back to you then the whole transaction  becomes a 'sale and rent back' agreement (my understanding) and so becomes regulated (see the link). So if you call them and say you would like to become a sale and rent back customer and they don't immediately send you the money advice service factsheet then perhaps best to walk away.  If they don't rent it back to you then it is not regulated and of course you need to find somewhere else to live! Citizens advice have said a few things and you can find the details HERE while the old FSA now partly the FCA had some consumer advice HERE.

 

Sorry but I think this particular firm might be sailing close to the proverbial wind so Cave(at) Venditor.

[Hecateh]

1 hour ago, SteamyTea said:

Do they charge fees for this fantastic service?

As they say in 'All The Presidents Men'. "follow the money"

 

23 minutes ago, ragg987 said:

Tread with care and maybe ask to speak to previous customers. 

 

15 minutes ago, MikeSharp01 said:

Ok have some more info and the news is not good - so it probably is too good to be true.

...  if they do rent it back to you then the whole transaction  becomes a 'sale and rent back' agreement ...

 

Found out that they are not in my area anyway so definitely no good for me.

 

But they don't charge anything - they pay solicitors and valuation so you can't lose many at that stage

 

I think @MikeSharp01 that is why they don't guarantee to rent back to you.  They keep the 2 agreements separate - legal?  who knows

 

My other concern would be about the money that remains owing - What if they go bust.  Suspect that works like an investment and if they go bust so do you.

 

On paper I can see it as potentially a good thing - them paying market value but retaining some, which the then pay you interest on at above bank rates.  So long as you don't need the money in the mean time it's a win win.  They are making money out of the investment but so are you.  In practice - well, I think if it was that good there would be a lot more companies doing it.  I'll pay my dues and go down the bridging mortgage route, despite the cost.

 

 

[AliG]

You don't get anything for nothing, if they are making a profit then you have to be losing out.

 

The assumption that everyone can profit because they are all sharing in house price appreciation is not a good one. House prices have fallen around 10% in central London in the last year, there are no guarantees.

 

In general it is cheaper to own than rent property. Rental yields are higher than mortgage costs. If they buy 75% of the property and you pay 100% of the rent then you would likely end up paying a 6-7% rental yield.

 

You could achieve exactly the same thing by getting a mortgage for 75% of the value of your house which would likely be cheaper and you'd continue to own it.

 

Obviously this could help cashflow if you don't have the income to borrow 75% of the value of your house, but if you don't then you probably shouldn't be selling it and renting it back either.

 

One of the reasons that people struggle to buy a house today is the difficulty in raising a large deposit, if they only buy 75% of the house then you are going to need 25% equity in it. It is unlikely you;d be able to easily or cheaply borrow this money and again this would be no different to getting an even higher loan to value mortgage.

[Hecateh]

1 minute ago, AliG said:

You don't get anything for nothing, if they are making a profit then you have to be losing out.

In many circumstances yes - certainly if I was intending renting the property long term.   

My thought was though for me just to rent for a few months whilst my new property is built.  As my new property is in the garden of the old one I can't sell the old one in the normal way at this stage as no one would buy a house at full value whilst building work is going on.  

So if I got 75%, that covers the cost of my new house plus about 30k, which.  The other 25% being invested with them for a few years.  So long as I was happy to have that money invested for that length of time.  AND supposing it was all safe and above board.  Then I would have saved the cost of arranging my mortgage, (which with all the extra insurances and warranties is costing around 5k)  and the interest payments on it for the months that my house was being built (Around 1k each month).  All against about £700 monthly rent.  So yes they would make money from me but I would still be better off.  

 

Moot point though as it's not available in my area and It sounds dodgy anyway.  

[SteamyTea]

Why not just sell up and rent?

[Hecateh]

Being nearly a year into this already and hoping to break ground next week I am invested in making it work and having my own purpose build space.

AND I've always owned my own home and don't want to start paying rent now.

 

My parents both lived into their 90's and Mum's 3 sisters all made 95 - so I could easily have another 30 years to go.  

 

[SteamyTea]

2 minutes ago, Hecateh said:

My parents both lived into their 90's and Mum's 3 sisters all made 95

I come from a disgustingly long lived family too

 

3 minutes ago, Hecateh said:

so I could easily have another 30 years to go.  

Takes that long to do just a bathroom, ask OnOff