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propertylawyer
propertylawyer, Solicitor
Category: Law
Satisfied Customers: 233
Experience:  Property Solicitor with expertise in commercial and residential property transactions.
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I have just agreed a purchase price flat at £128K from my

Customer Question

Hi I have just agreed a purchase price for a flat at £128K from my landlord, as it needs a lot of work inside and out, however Ive just had a homebuyers report done the valuation came in at £150k will my solicitor ask me to get indemnity insurance, or ask the landlord to sign to say they are selling to me at a special price?
I would rather not let him know what the valuation came in at as he will ask for more money, is this necessary? The adviser from the lenders is not sure but reckons I may have to get the seller to say he sold me it at a cheaper price, and has no claim on the property for doing so, and I will need indemnity insurance to cover this, is this true?
1) will the lender expect me to do this?
2) Can I now request a better LTV rate as I am now 72% with it being £150k than 85% being £128 thank in advance
Submitted: 5 months ago.
Category: Law
Customer: replied 5 months ago.
Hi I have just agreed a purchase price...
Hi I have just agreed a purchase price for a flat at £128K from my landlord, as it needs a lot of work inside and out, however Ive just had a homebuyers report done the valuation came in at £150k will my solicitor ask me to get indemnity insurance, or ask the landlord to sign to say they are sellingto me at a special price?I would rather not let him know what the valuation came in at as he will ask for more money, is this necessary? The adviser from the lenders is not sure but reckons I may have to get the seller to say he sold me it at a cheaper price, and has no claim on the property for doing so, and I will need indemnity insurance to cover this, is this true?1) will the lender expect me to do this?
2) Can I now request a better LTV rate as I am now 72% with it being £150k than 85% being £128 thank in advance
Expert:  propertylawyer replied 5 months ago.

Hi Mo

Thanks for your question.

I don't think you have any issues here. The real problem would have been if the valuation came in less than your offer.

There is a genuine reason for your agreed price, the property needs renovation.

1. If the property is being sold at an undervalue a declaration of solvency may be required in certain circumstances. However, if this is an arms length transaction with a very valid reason for the agreed price it may not be necessary. If the seller went bankrupt soon after the sale a trustee in bankruptcy would have to establish that insolvency was due to the sale of the property at an undervalue in order for the sale to be set aside. Discuss this further with your solicitor to establish if you both think that this is necessary.

2. This point you can discuss with the broker or lender direct. Although I would imagine that you will be held to the £128k figure as it is this amount which you are buying for.

Any other questions / queries in respect of the above please feel free to contact me.

Please remember to accept /positive rate my reply.

King regards

Paul

Expert:  propertylawyer replied 5 months ago.

Mo, forgot to mention that the Law Society Conveyancing Handbook suggests insurance is not needed in to protect a lender's interest however some Lenders ask for the indemnity insurance to be implemented in these circumstances and there is a standard policy covers an interest acquired by a mortgagee. I wouldn't say the the conveyancing handbook is definitive on the issue.

If your lender requires it, get it. It should not cost that much

Customer: replied 5 months ago.
HI Paul thank so much for theswift reply,I am still not fully clear, or is it a case of may or may not need. The advise at the mortagage company nationwide said that I could ask go for the better rate using the higher value of £150K thus decreasing my LTV but she said the below if I do (see below) But I would happy waive the better rate to avoid alerting the owner to the valuation. The buyers report came back with so many urgent recommentadations including damp, woodworm and chimeny and roof issues,rotten window etc but I am told that the value of £150K included and is the value in its present state. Does this, or will this be classed as a bargain sale?
......
Hi Mo, If your solicitor confirms that this is a genuine bargain price to Nationwide, then you could reduce your deposit and borrow more money .Providing the new mortgage is no more than £112500 you could get the 75% rate at 2.24%Hi Mo,
Here are the detail of what is considered as a genuine sales price . I would suggest you discuss this with your solicitor as this indemnity may be required whether the rate changes or not, if it is considered a genuine bargain price.
Kind regards
Julie
3.12.2 Definitions
Genuine Bargain Prices is defined as any sale where the vendor is purposefully and knowingly selling the property to the applicants at an under value. These include:
inter family sale (buying from a relative);
employee (buying from their employer);
private tenant (buying from their landlord).
NB. In these cases, the discount must be a gift, not a loan, and it is unacceptable to have any conditions attached to the gift. If conditions are attached, the case must be treated as an Equity Loan. (See section 3.1 of the Property (including Valuation) Policy).
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3.12.3 Legal Considerations
Applicants must be made aware that a declaration of solvency and an indemnity policy will be required because of legislation applicable to insolvency where a transaction has been completed at an "under value". Their conveyancer should obtain these on their behalf as required by the CML Lenders' Handbook.
Expert:  propertylawyer replied 5 months ago.

3.12.3 tells you exactly what you need. Without meeting this requirement your lender will not lend. Lender's requirements vary and the lender can set its own requirements which you will need to comply with.

It is down to your solicitor to determine whether or not he feels this constitutes a bargain price based on the lender's criteria. The criteria gave 3 circumstances, were those examples or was the list definitive. Your solicitor will need to interpret and act accordingly.

Expert:  propertylawyer replied 5 months ago.

Hi Mo

I hope my answer was helpful.

I can assist further if necessary. But can I please ask you to positive rate my reply. It is how the site works to ensure I get credit for helping you.

I can still assist you after rating. Thanks.

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