7 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 is shared ownership?
Shared ownership is a scheme that tries to help those unable to afford a home to get a step up onto the property ladder. Buyers purchase a share in a property and then pay rent on the remaining share. This rent is usually at below market rates - somewhere around 2.75% of the share’s value - and goes to a designated housing association.
This tends to end up as a cheaper option to purchasing a whole property for many people. This is partially because you only need to take out a mortgage for the share you’re purchasing. This means the amount of money required for an upfront deposit is a lot lower.
If you have a shared ownership property you’ll also have the opportunity to increase the amount of the home you own through a process called ‘staircasing’. When you take on a larger share, you decrease the amount you pay in rent. When you reach a 100% share, you’ll no longer pay any rent at all - just your mortgage, ground rent, and service charges.
How to sell a shared ownership property
Selling a shared ownership property is slightly different to other home sales.
The first thing you’ll need to do is get in touch with your housing provider. They will help you find a professional RICS qualified surveyor who will come round and value your home. If you’re happy with the valuation, you’ll need to confirm with your housing association that you’re happy to begin the sales process.
In most cases your housing association will have a certain amount of time from this point of confirmation to sell your home. This is called the ‘nomination period’, and usually lasts about 8 weeks. The idea is to give the housing association a chance to make sure your home goes to another person looking to buy in an affordable, shared ownership way.
If your housing association hasn’t found a buyer in this time, you will be able to advertise the property yourself - either privately, or with the help of an estate agent.
Whenever a potential buyer has put 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). You can begin the legal stage.
The legal process of transferring ownership of a property is called ‘conveyancing’. It begins when your lawyer contacts the buyer’s legal representative, and they start the process of negotiating the final details of the sale contract. Once you’re both happy with the contract, you will sign and ‘exchange’ it. Then, on the set date, you will ‘complete’ the sale. This is the day that the buyer transfers over the money, and you give them the keys.
For more info about the conveyancing process, check out our guide.
Are shared ownership properties hard to sell?
Even though selling a shared ownership property is different to other home sales, in the majority of cases it shouldn’t be any more difficult.
Given the demand for affordable housing in the UK, housing associations generally have a waiting list of potential buyers who have already registered their interest in buying a shared ownership home. This means they have a pretty large pool of buyers already on hand to market your home to.
Housing association, Peabody, claim that they have a 98.8% success rate in finding a buyer within their 8 week nomination period. They put this down to their access to this list of registered buyers, and their ability to market widely and effectively.
In the event that your housing association isn’t able to find a buyer within their nomination period, it may be more difficult to sell your home. You’ll have to find a buyer who fulfills your housing provider’s eligibility criteria, and can get an appropriate mortgage.
If you haven’t increased your share to 100% at the time of the sale, you’ll need to sell a share equal or higher to the value of the share you currently own. For example if you have a 25% share, you could sell a 30% share, but you could not sell a 20% share. Usually your buyer will need to be a first time buyer too.
Selling a share in a home is made more difficult by the fact that not all lenders have shared ownership mortgage products available.
Because of these restrictions your pool of potential buyers is smaller when selling a shared ownership home on the open market.
Making sure you have the best performing estate agents on your team will make a huge difference in the success of your sale. We recommend talking to at least three agents before you decide who to work with. Use this time to discuss their experience of selling shared ownership properties, and how they would go about marketing to your target audience.
Our nifty comparison tool can show you the best performing estate agents in your local area; simply pop in your postcode. Check it out now.
What fees do I have to pay when selling a shared ownership property?
When you have a shared ownership home the costs of selling are also slightly different to those in a normal house sale.
Make sure you 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.
Note: You’ll also need to make sure you’ve paid off any mortgage or rent arrears, and any outstanding service charges before you put your house on the market, or you will not be able to sell.
If you’re unsure what financial obligations you’ll have when you sell your home, read through your original lease and contract. This should detail clearly what costs you are liable for. You can also talk to a conveyancer, or an independent advisor. Both will be able to offer guidance that’s tailored to the specifics of your home sale.
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