8 mins read
Finding objective information about shared ownership properties can be difficult. Shared ownership is a fairly new form of home ownership in the UK, so most of the information out there is written either by those who hugely support the scheme, or those that don’t.
Below we attempt to cut through all the confusion. We look at how selling a shared ownership house works - how it’s different from your usual home sale, and what fees are involved.
What’s shared ownership?
Officially called Help to Buy: Shared Ownership it’s a government-backed scheme intended to help buyers who can’t afford a full mortgage.
The scheme allows buyers to purchase a ‘share’ of between 25% and 75% of a property’s value and pay rent on the remaining share. Rent on shared ownership homes is generally lower than market rate, and are usually paid to the housing provider.
If a buyer would like to purchase a larger share their property later, they can do so through a process known as ‘staircasing.’ Staircasing allows buyers to gradually purchase larger shares of the property, leading to lower rental fees on the remainder of the property. Buyers can staircase to 100% ownership.
Because shared ownership is a type of affordable housing, in order to buy into a shared ownership property, you must meet certain criteria tied to income and financial resources. This is designed to make sure that shared ownership properties are available for people who cannot afford to pay full market value for their home.
All shared ownership properties are leasehold rather than freehold. As the leasehold owner of a share, you’ll have an agreement (or lease) with the freeholder - usually a housing association, developer, or housing provider - to use the property for a fixed amount of time. Your lease will contain a variety of obligations for both you and the freeholder. This includes things like who will maintain communal areas - like gardens and stairwells - and how long your lease will last for.
How does selling your shared ownership property work?
If you’re looking to sell your home soon, begin by checking with your housing provider. Most housing associations will levy a charge to cover the cost of selling your shared ownership home. You should also be able to find the details of any fees you’ll need to pay when you sell your home in your original lease.
You will also need to pay off any outstanding debts on your home, such as any remaining mortgage or rent arrears, before you can put your shared ownership property up for sale.
Next, your housing association will arrange for an independent RICS qualified chartered surveyor to determine the market value of your property. This is a necessary step towards setting the asking price for your share. You must sell at this determined market value – neither more nor less.
Any improvements you’ve made to your home will also be included in the surveyor’s assessment of the property’s market value. While many improvements often do boost the value of your share, others do not. Do your homework to learn which ones will help you.
When you’re selling a shared ownership home, you’re required to sell the entirety of your stake in a shared ownership property - not just a portion of your share. So, if you own 50%, then you must sell at least that 50% share to the new buyers. The housing association you lease from will then keep the remaining share.
However, you have the option to sell more than your current share (up to 100% ) of your home even if you currently only own a portion of it.
How does that work?
Your housing association usually has a limited period of time to find a buyer for your home before it goes on the ‘open market’ (for sale by an estate agent). If they don’t find a buyer in the time allowed (typically eight weeks), you can sell the entire property through a process known as “simultaneous” or “back-to-back” staircasing.
Here’s how it works: On the same day your sale goes through, you increase your share of the property to 100%. The funds for the extra shares will be drawn from the money paid by the buyer, so there’s no need for you to borrow money. Additionally, making the sale this way allows you to accept offers of more - though not less - than the amount of your market valuation.
What eligibility criteria does the buyer need to meet?
Like when you bought your property, any buyers you find need to meet the requirements set out in the shared ownership scheme. For instance, the buyer’s combined household income can’t be more than £80,000/year (or £90,000 in London) and they must have sufficient financial resources to cover the deposit. They’re also often first-time buyers.
If you’re unsure what criteria they need to fulfil to qualify for your shared ownership home, it’s best to check in with your housing association.
Is it difficult to sell a shared ownership property?
Every case is different, but most housing associations already have many prospective buyers who’ve registered their interest in buying into a shared ownership home. That means you’ll probably find a buyer within the allotted period, before your property goes onto the ‘open market’ for sale by an estate agent. Peabody’s, one of the largest housing providers in London and southeastern England, have reported finding a shared ownership buyer within the eight-week period 98.8% of the time.
If your property doesn’t sell within eight weeks, you may need to sell your home on the open market, with an estate agent. This is slightly more difficult than a standard home sale, because you’ll have to find someone who fits the shared ownership criteria, and is able to find a suitable mortgage product to support their sale.
Whenever a potential buyer puts in an offer on your home, they will then have an interview with an independent financial adviser to make sure they are eligible for shared ownership. If they pass this stage, and a sale is agreed, your housing association will provide written confirmation of all the details (also known as the memo of sale).
Because shared ownership sales are slightly different to standard sales, making sure you work with an experienced estate agent is vital. To find the best performing estate agents in your area, try this free tool. Just pop in your postcode and it’ll show you the best 6 agents operating near you. Head there now.
What fees do I need to pay when selling a shared ownership property?
Different factors - chiefly, where you live, and the size of the property - affect how much you should anticipate paying in fees when selling your home. But, as a general guideline, you should budget for the following costs:
- Housing Association Marketing Fee
Many housing associations will charge a fee for their marketing costs during the nomination period. These vary but some of the larger housing associations (like Peabody) charge around £350.
- Valuation Fee
You will be required to cover the cost of a surveyor visiting your property and conducting a valuation. This fee depends on the location and size of your property, but you can expect it to be between £250 and £500
- Legal Fees
You will have to pay for both your own conveyancer, and any legal fees incurred by your housing association. Budget at least £1,000-£2,000 for this.
- Leasehold Information Pack
When you sell a leasehold, it’s common for the buyer’s solicitor to request a Leasehold Information Pack. This contains the details of your obligations as a leaseholder. Expect this to cost about £200.
It’s a legal requirement that all properties have a valid EPC (Energy Performance Certificate) before they are put on sale. Most housing associations and estate agents will charge about £50-£100 to arrange this for you, but you can get one for less through our partners. Get a quote here.
- Assignment Fees OR Estate Agent Fees
If your housing association sells your property within the nomination period, they will take a percentage of the sale price as their fee. Peabody for example takes 1.5% plus VAT of the final sale value of your share.
If you end up selling through an estate agent, you won’t pay an assignment fee, but you will have to pay estate agent fees. Unlike assignment fees, these are charged on the full value of the property, rather than just your share.
Further steps to take
Obtain a good solicitor, at a price you can afford. You’ll rest easier knowing you’re in good hands.
Arrange for attractive photos and videos to be taken of the property. It’s hard to overstate how important it is for your home’s images to stand out!
Start looking for your new home. However, refrain from making an offer on a new property until you’ve agreed on terms with a buyer for your current home.
Compare Local Estate Agents
See which agents will do the best job of selling your home.
What is equity release? Is it right for me?19 Oct 2020
In these belt-tightening times, many of us are looking for ways to access a little extra cash. If you’re a homeowner over age 55 and nearing retirement, you might have seen advertisements suggesting that equity release could ease your cash crunch. Equity release refers to a process that allows homeowners to take value from their home and turn it into a cash lump sum. It involves either taking out a loan against your property or selling a share of your home to your provider. It can help you access (‘release’) the money (‘equity’) tied up in your home. ### Is equity release right for you? Entering into an equity release scheme is not a step to be taken lightly. It’s a major lifetime commitment that has useful upsides for some people, but isn’t right for everyone. Releasing equity can feel like a quick solution to a tough problem. In truth,...
How will the new tiered restrictions impact the property market?12 Oct 2020
Today, the Prime Minister announced a new set of guidelines for tackling coronavirus. The government has put forward a tiered system of restrictions for England. The ‘traffic-light’ style system has three levels: **Medium** The the default level for all areas in England * A maximum of six people can meet together (the Rule of Six) * Pubs and Bars have to close at 10pm **High** * No meeting with other households indoors * The rule of 6 applies to meetings outdoors * Most areas already in local lockdown will go into this tier **Very High** * Households are not allowed to mix either indoors or outdoors * Pubs and bars will close completely (and potentially other hospitality, and leisure facilities, depending on negotiations with local leaders) Under all of the tiers shops, schools, and universities will remain open. ### I’m in a very high alert area, can I still move...
Selling a UK property from abroad8 Oct 2020
The actual process of selling your home in the UK from abroad is not that different from selling a home whilst you're in the UK. With the right team in place, it should all go very smoothly. And, you don’t even need to return to the UK. The main thing to take into account are the tax implications. How you've used the property whilst you’ve lived abroad will impact the amount of Capital Gains Tax you’ll need to pay when you sell your UK property. You’ll also need to take into account the tax laws of the country you’re currently living in too. If you’re considering selling your UK residential property from abroad, these are some of the things you’ll need to bear in mind: ### Pick an estate agent you can trust Every home selling journey begins with deciding which estate agent to use. When you’re selling a property...