One of the properties currently on my books is a very nice five bedroom semi in an upmarket city suburb; it is priced to sell at £320,000. Surprisingly, out of eight initial viewings, five of them have been from first time buyers, most of them cheerfully admitting to help from the bank of mum and dad. The obstacles in the way of a first time buyer getting on the property ladder with a house at this price level are considerable.
I’ve spoken before about the standard 25% deposit expected by most lenders before – in this case £80,000 which is a huge amount of money to find – but the other big problem is the stamp duty. A lot of first time buyers are stamp duty exempt because their first house costs less than the £125,000 threshold, but beyond £250,000 stamp duty jumps to a hefty 3%, £9,600 if this house sells for the asking price. Stamp duty is simply a tax; you can’t borrow the money on your mortgage and it doesn’t go towards the equity you have in your property. By the time solicitors’ and moving costs are taken into account, our first time buyer will need to have about £95,000 in the bank.
One of the viewers really liked the house but only had £85,000 available. To get round the shortfall they tried offering £280,000 which, naturally, the vendor rejected out of hand. I came up with a solution to the problem – the buyer would pay the full asking price but the vendor would pay the stamp duty. This meant that the vendor was& effectively receiving £310,000 for the property, the lowest price they would accept, and the buyer had to find £80,000 for the deposit, plus around £5,000 for solicitors’ fees and moving costs making up the £85,000 they had in the bank. The deal went through and everyone was happy. Sometimes you have to think outside the box in the current housing market.
Estate Agent
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