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Laurie

Flat Sold With Massive Shortfall

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Hi

I bought a flat in Shropshire in winter 2007, to my understanding really at the peak of housing prices. I had been renting with my then boyfriend for years and was fed up with an unfortunate chain of unreasonable landlords and the feeling that every months rent was dead money. Our joint income was very low and there was a shared ownership housing scheme beginging with some new build flats round the corner from where we were renting, so I looked into it and found that we qualified. After an 8 month process of applications and waiting for the property to be finished, we moved in to a home that we owned a half share in and that we could decorate and would be left more or less alone by the housing association that jointly owned it. Happy days.

This did not last long however, we broke up almost exactly two years later. We both moved back with our parents, emptied the flat and put it on the market. The new value was significantly less and it dropped over the next two years agin even further. It finally sold two weeks ago. Now that I'm finally getting everything tied off with it and begining a fresh start at long last I'm looking at the values and wondering what I can do about it.

It was a two bedroom flat 1/2 a mile from town centre with a private entrace, main and ensuite bathrooms and right next to main railway line into the town.

Values are as follows - £ full value / £ 1/2 value

(bear in mind I owned half as it was shared ownership)

Purchased for - £158,000 / £79,000

Valued Jan 2010 - £124,000 / £62,000

Valued August 2010 - £118,000 / £59,000

Valued May 2011 - £112,000 / £56,000

Please bear in mind that the Jan 2010 valuation was done by the housing association's surveyor... he did no research on this and gave it to me as a verbal value on the day. The Aug 2010 and May 2011 valuations were both done by my own indipendant RICS surveyor who did her research and put the valuation to me in writing after a few days.

This has been a long and horribly complicated sale and I'm very glad that it's over. But the defecit has been huge. The drop amounted to £46,000 in total which despite the crash in prices seems incredible to me. We have been responsible for half of this as the housing association owned the other half. Myself and my ex have had to take out a personal loan each to pay for our respective 1/4's of the shortfall (11,500 each) and will be paying this off for some time to come. I feel that the initial price this property was sold for must have been well over it's true value and I'm interested to hear the opinions of members here on this.

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Hi

I bought a flat in Shropshire in winter 2007, . I feel that the initial price this property was sold for must have been well over it's true value and I'm interested to hear the opinions of members here on this.

We let bent UK Govt and Bankers talk up housing/turn basic need 'shelter' into a gambling commodity - you lost on the biggest purchase of your life buying at the wrong moment!

Pay your losses and buy with past experience - if it hasn't put you off.

The Elites deliberately don't teach upcoming generations about housing in skool so they can put one over you (exploit your future productive income/wealth doing nothing as land holders/land-bankers/bank shareholders creaming profits off the top)!

Edited by erranta

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Sadly I think your story will be repeated time and again in Northern Ireland but unfortunately with much bigger losses as the shared ownership houses were very overvalued and have collapsed by at least 50%.

Would you mind if I put your story on the main page so that others who might be tempted into shared ownership can see the other side of the argument?

You would also get a broader range of replies too.

Thank you I wouldn't mind at all. The whole thing has been so complicated, It took three fallen through sales to get to the end as well. A massively stressful experience and my housing association were as much use as a chocolate tea cup throughout. The more people can learn something from my experience the better I reckon!

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I feel that the initial price this property was sold for must have been well over it's true value and I'm interested to hear the opinions of members here on this.

Yes it was - but then the whole housing market is priced well above true market value. It was in 2002, it was in 2007 and it still is. Between 1996 and 2001 you could have bought an entire 3 bedroom semi for the same amount you paid for a 50% share in your flat. Yes, just 6 years before.

The entire UK housing market is a huge financial scam driven by the greed and ignorance of the public and the greed and immorality of the mortgage lenders and politicians who created an environment in which such crooked behaviour thrived (all for their own private financial gain).

I'm genuinely sorry to learn about what you've been through. Yours is a cautionary tale of the problems that persist in the UK housing market and the very real dangers of shared ownership. Shared ownership is a con.

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Logically a shared ownership home should be about half the price of a non shared ownership one (assuming 50/50 split). I've never seen this in reality, they are all overvalued above the already overvalued asking prices of other homes by about 20%-30%. Shared ownersip is the worst of all worlds and is only there to prop up a failing market. It's one of the many aspects of UK Homes that needs to be stopped.

Sorry to hear your story, it's an expensive lesson for you to learn. Make sure everyone you know hears about it to help them avoid making the same mistake.

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Thank you I wouldn't mind at all. The whole thing has been so complicated, It took three fallen through sales to get to the end as well. A massively stressful experience and my housing association were as much use as a chocolate tea cup throughout. The more people can learn something from my experience the better I reckon!

Be prepared for some mudslinging though...is all I`m saying..The way you have explained your experience, you seem straightforward and wasn`t out to "invest". So I hope peeps bear this in mind...

You ask if the flat was overvalued in 2007?...all flats and all houses have had (for want of better wording) false values placed on them,and these values bore no relation to what a place to live in should have had, over the last ten years or more...

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Hi Laurie,

Very sorry to hear about your bad experience; I hope that - with time - you will be able to step back and learn from it. Your joining this site might well be a sign that you have already started :)

Don't be surprised if you get the occasional sour post in reply to your anecdotal; HPC prides itself on its macho, no-prisoners-taken attitude - "if you want hugs, sod off to moneysavingexpert" :(

Like Pytyr, I hope that you will be brave enough to stand up to friends, family and colleagues, and tell this story - I know it's never easy to admit to "being a loser", but this kind of cautionary tale is sorely needed in our mad houseprice crazed country.

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Hi Laurie,

Sorry to hear about your experience with the Housing Association. I had a shared ownership flat until 2009 and I really wasn't impressed with the HA either. I got so fed up with them I sold up - they scheduled huge building renovations and then imposed an extra £240 a month rent hike for a year to cover the costs. I tried to appeal to spread the costs over a longer period but they made me feel pretty small for suggesting such a thing. Did a pretty crappy job of the works too. As soon as the building work was complete I sold up

The significant thing about the whole episode was the the surveyor that came round to evaluate the place when I did sell had very strong opinions about how Shared Ownership was inflating house prices. In other words the so called solution was actually making property more unaffordable.

Once bitten, twice shy for me.

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Be prepared for some mudslinging though...is all I`m saying..The way you have explained your experience, you seem straightforward and wasn`t out to "invest". So I hope peeps bear this in mind...

You ask if the flat was overvalued in 2007?...all flats and all houses have had (for want of better wording) false values placed on them,and these values bore no relation to what a place to live in should have had, over the last ten years or more...

Hey, well I am quite prepared for that. It was not a wise move at all, I have to live with that every day. My only defence being that I was in my early twenties and I have learned a little more about the world since then. It was never meant as an investment, I would never expect to try and invest in anything without the money to do it. I think the sad nature of the shared ownership scheme is that anyone getting involved is generally someone with a low income, who just wants their own nest, a place to call home and stay in for a long time. This would never have been an issue had we not broken up. But it may speak volumes for the break up of the relationship, that I chose to meet a potential £10,000 shortfall of my own than stay involved in the home I tried so hard to make. It felt like a massive personal failure.

All I've wanted since I began to rent was my own home, not an investment but a place to live. This has not put me of ownership, but it has put me off the shared scheme and I would advise anyone taking part in it to think twice, as the fact they need assistance to purchase will mean they are unlikely to cope financially if things go wrong as they did for me.

My main thought with the value is that because it was a new build and for the "affordable housing" scheme, somebody surely has made a massive increase on the house which not only goes against the basic idea of the scheme, but becasue it's a new build the value surely should be more accutrate due to knowing at the time exactly what the cost of building was. I understand that a profit needs to be made on it of course, but it seems irresponsible to have priced it at that value, especially when the plot contained over 170 homes, and a good 1/4 of them went to "affordable housing"

I may get no where with it. But I intend to look into this so that at the least I can look back on this one day and know that I tried my best for myself to explore every avenue for help when I feel that the system has let me down. I may have been naieve. But the lack of decent financial advice and honesty thoughout the whole ordeal has made it a far harder lesson to learn.

Thanks for your kind comments folks.

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My main thought with the value is that because it was a new build and for the "affordable housing" scheme, somebody surely has made a massive increase on the house which not only goes against the basic idea of the scheme, but becasue it's a new build the value surely should be more accutrate due to knowing at the time exactly what the cost of building was. I understand that a profit needs to be made on it of course, but it seems irresponsible to have priced it at that value, especially when the plot contained over 170 homes, and a good 1/4 of them went to "affordable housing"

Thanks for your kind comments folks.

Well, thats it in a nutshell..we are supposed to pay due dilligence but, where do people start..the basic idea of the scheme at face value is good. But economic reality will never support one in an altruistic sense. Someone is usually pulling the financial strings ultimately, and this someone is the one who stands to gain the most...everyone else along the line are foot soldiers thinking they are either doing what is right,or making a litle bit for themselves too and 99% of people involved in these schemes go along with them, even if they see flaws in the slogans and propaganda which sucks buyers in....

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Laurie, thanks for posting and I wish you the very best for the future. :) Looking back, I ended up paying over the odds for my property when I bought in 2004 (not shared ownership), which I fortunately manage to sell a year ago. We were all blinded by the fact that 'property prices only go up' . How naive I was. :unsure:

The significant thing about the whole episode was the the surveyor that came round to evaluate the place when I did sell had very strong opinions about how Shared Ownership was inflating house prices. In other words the so called solution was actually making property more unaffordable.

Interesting point.

There are a couple of neighbouring s/o 2 bedroomed flats on the market. When I last looked on RM, one is on for £60k and the other for c.£56k. I guess both residents are p'd off with the shared ownership and now want out of them. Looking at other flats nearby, they look horribly overpriced.

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sorry, but im not clear..what did it sell for, and how was the money apportioned please.?

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The way I look on it now is that Housing Associations are just glorified BTL landlords with the Yield being the rent that is paid. The flats are valued at local market rates but do not in my opinion sell at local market rates - except when the HA's sell them as shiny and new.

On the older properties the annual rent is around 2.5% of the non-owned value of the property. With the new developments its more like 3.75%. The higher the value of the property the more rent they can command. I guess the HA's need a minimum "yield" to keep the scheme viable, so it's in their interest to get the highest price that they can.

The HA's must be taking a big hit just now as any resales will be valued lower than when new and they will command a lower rent. Can a HA go bust?

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Is it possible you could be any more specific by naming the town? No probs if you can't - it's just that I'm also in Shrops and keep an eye on the market too.

(forgot to post yesterday to wish myself a happy one year anniversary :angry:)

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MattW

My above post might also explain why the Shared Ownership properties have an asking price that is higher than the market. When you sell a SO property you have to use one of the surveyors on the HA list, and then you are committed to sell at that price for a minimum period of time (6 months if I recall).

Only after that period has elapsed can you negotiate with the HA to lower the asking price. That's what I had to do.

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Laurie,

Sorry to hear what's happened.

You have paid an expensive lesson and the only consolation is that it would have been even more expensive. Others have paid a lot more for the same lesson.

When you bought the house who valued it then? I've read that lenders have been using no win no fee solicitors to challenge surveyors about valuations that were too high. Could you try something like that?

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6897554.ece

Of course the sad thing is that by doing the shared equity scheme you may have forced others into the same sort of financial loss. Shared equity is what is enabling builders to charge so much for new houses and then this feeds through to the market as a whole so everybody has to pay more than necessary.

Edited by Redhat Sly

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First, commiserations on your experience with the major misselling scandal of recent times.

I think 2007 may have been peak-shared-equity. Possibly because Northern Rock took away the widespread sense of urgency to 'get on the ladder' at any cost. I was sent literature about such schemes locally twice, and a look at the blog reveals they were both in 2007 (January and August - which I viewed). Happy to say I was sceptical both about the deals and about my chances of qualifying.

The interesting question arising out of your story are whether you'd have lost more if you'd bought 100% (because you'd've taken 100% of the loss), or less because you wouldn't've been suckered in to offering a full asking price. Or might the two just broadly cancel each other?

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sorry, but im not clear..what did it sell for, and how was the money apportioned please.?

It actually sold for the final valuation figure. The same surveyor did the final two valuations so she felt the offer was not unreasonable and after some reserach to support it, agreed with me that a property is only worth what someone is willing to pay for it anyway.

The housing association were responsible for their half of the resulting £46,000 shortfall, I split the other half between myself and Ex. No doubt there will have been some scheme in place to protect the housing association, I'm sure they explained to me at some point last year that they were protected by the govornment from losing out in situations such as this.

One interesting point was that becasue I was selling 100% share I was selling the housing associations half too. Becasue I was the one rejecting / accepting offers, I was the one with the control over what the total defecit for all involved turned out to be (talk about preassure when negotiating). Had this been a profitable sale to a 50% ownership buyer I understand that the rules dictated that there could be no profit made on the sale by me becasue it would cause an unbalance in the 50/50 ownership split (nice of them).

Becasue I was the one doing the negotiating I was also responsible to pay for any shortfall between the valuation of the housing association's half and the price I received for it if it was less. For this reason it was actually favourable that I received a valuation that agreed with the buyer's final offer (I turned a few far lower offers down before he actually went UP to £112,000!)

One more note on housing associations greed... I also understand that if you make a home improvement which adds value to your shared ownership home (new kitchen, extension etc) then if you were to staircase and purchase a further share you would actually buy for that increased price. So even though you were the one to spend that money on it in the first place, they get the money you spend buying your then more valuable home. Even in that instance they win and you spend!

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One more note on housing associations greed... I also understand that if you make a home improvement which adds value to your shared ownership home (new kitchen, extension etc) then if you were to staircase and purchase a further share you would actually buy for that increased price. So even though you were the one to spend that money on it in the first place, they get the money you spend buying your then more valuable home. Even in that instance they win and you spend!

That at least is one up from renting, where any value you add belongs entirely to the landlord (except insofar as you can prevail on his/her goodwill).

It's also one up on business premises, where the tenant bears all the costs of refurbishment even on a short lease.

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I feel that the initial price this property was sold for must have been well over it's true value and I'm interested to hear the opinions of members here on this.

You won't like this opinion but here it is;

The value of anything is the amount that the market is willing and able to pay for it at that particular point in time.

You were willing and able to pay £79k for a half share in this flat. Therefore that is what it was worth at that time. Buyers set prices - not sellers, and you set the price at this level.

Of course, values change over time, and the fact that the flat has fallen in value does not mean that it was over-priced when you bought it any more than a property that rises in value was necessarily under-priced when it was last sold.

You bought at the market value pertaining at the time and that value has since fallen. All that has happened is that you made a bad decision.

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MattW

My above post might also explain why the Shared Ownership properties have an asking price that is higher than the market. When you sell a SO property you have to use one of the surveyors on the HA list, and then you are committed to sell at that price for a minimum period of time (6 months if I recall).

Only after that period has elapsed can you negotiate with the HA to lower the asking price. That's what I had to do.

Yeah I had to use theirs the first time. But then I learned that I could use any RICS chartered surveyor and that valuations lasted only 3 months. I didn;t get it valued too often during that two year period becasue of the expense of it.

And in answer to the 100% ownership query as well... I simply could never have afforded that option anyway. The joint household maximum borrowing capacity we had at that point was £80,000. Hence the need then for shared ownership becasue there simply weren't properties in the Shrewsbury area at all for that value (not even a studio apartment on the rough side of town would have gone for that little). It was this scheme or nothing for me... I just wish I had chosen nothing ... to continued to rent.

As for the no win no fee claims idea this is exactly what I have in mind. It may get me nowhere... but if it does help then I will report back I hope... we shall see...

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Looking on the positive side - if you had bought the flat outright you would have lost twice the amount and

TBH 11.5K each is not a lot of money - although it may seem like it to you at the moment.

Some people must have lost 100K plus on flats over the last couple of years

and if prices continue to fall you will save many times the money you lost if you buy again in future.

To put it in perspective anyone going to Uni in the future will have to borrow 9k just to pay 1 years tuition fees

:)

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  • 284 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
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      • Even
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      • up 5%



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