Spike Posted March 18, 2005 Share Posted March 18, 2005 In my area a few houses are now advertised with "vendor will pay stamp duty". I just cannot undertsand this - the vendor and the buyer are both better off the lower the offer is, as less of their money goes in stamp duty. For example a flat for £170k where vendor pays stamp duty. Buyer pays 170k Tax man gets 1700 seller gets 168300 the seller would be far better trying to get an offer of £168,317 so that buyer still ends up parting with 170k when including stamp duty (buyer would be indifferent between the two). I know it is only £17 in this example but it is still better than nothing. Working it through, if instead you take a 270k house in the 3% band, the seller would be £236 better off asking for an offer of £262,136 (buyer still pays 270k in total). I guess that buyers and sellers just haven't though it through if they go ahead with such deals. The only person who benefits is the tax man .... oh and of course the estate agent as they get their percentage of a higher fee. Quote Link to comment Share on other sites More sharing options...
Spike Posted March 18, 2005 Author Share Posted March 18, 2005 I guess this also includes offers of paying towards the mortgage from new homebuilders - they would be better off taking the amount off the price so that for the buyer parting with the same amount of money would result in the seller receiving more. Can anyone else think of offers that are meant to be good deals but, when you think about it, aren't really? Edit: I should add that of course the buyer could flip the situation on itshead and take/share the benefits from getting rid of such offers and just paying a sensible asking price by offering the seller the same amount fo money they would have received and banking the saved stamp duty themselves / share it with the seller if they are both switched on. Quote Link to comment Share on other sites More sharing options...
alexays Posted March 18, 2005 Share Posted March 18, 2005 In my area a few houses are now advertised with "vendor will pay stamp duty". I just cannot undertsand this - the vendor and the buyer are both better off the lower the offer is, as less of their money goes in stamp duty. For example a flat for £170k where vendor pays stamp duty. Buyer pays 170k Tax man gets 1700 seller gets 168300 the seller would be far better trying to get an offer of £168,317 so that buyer still ends up parting with 170k when including stamp duty (buyer would be indifferent between the two). I know it is only £17 in this example but it is still better than nothing. Working it through, if instead you take a 270k house in the 3% band, the seller would be £236 better off asking for an offer of £262,136 (buyer still pays 270k in total). I guess that buyers and sellers just haven't though it through if they go ahead with such deals. The only person who benefits is the tax man .... oh and of course the estate agent as they get their percentage of a higher fee. <{POST_SNAPBACK}> Its usually around the bands where the seller is trying to get an offer of say £275,000. But buyers will be loath to pay the extra £6000 in stamp duty after £250,000, so the seller could end up with several offers at £250,000, when the house may be 'worth' £270,000. In order to make out to the buyer that they don't have to pay the tax the seller will offer to pay it for him. Does it work? I don't know. I sold my house for 250,000 (when initially valued for 275,000) and wish I had tried it. Renting now. Quote Link to comment Share on other sites More sharing options...
Spike Posted March 18, 2005 Author Share Posted March 18, 2005 Its usually around the bands where the seller is trying to get an offer of say £275,000. But buyers will be loath to pay the extra £6000 in stamp duty after £250,000, so the seller could end up with several offers at £250,000, when the house may be 'worth' £270,000. In order to make out to the buyer that they don't have to pay the tax the seller will offer to pay it for him. Does it work? I don't know. I sold my house for 250,000 (when initially valued for 275,000) and wish I had tried it. Renting now.<{POST_SNAPBACK}> Yes thats the whole point - the buyer thinks paying the stamp duty is bad - but the vendor paying it for him does not make them better off!! Only if the buyer doesn't undertsand this (which seems likely for Joe Public) would they actually think an offer to pay the stamp duty for them was actually in their interests. Quote Link to comment Share on other sites More sharing options...
Michael Posted March 18, 2005 Share Posted March 18, 2005 Yes thats the whole point - the buyer thinks paying the stamp duty is bad - but the vendor paying it for him does not make them better off!! Only if the buyer doesn't undertsand this (which seems likely for Joe Public) would they actually think an offer to pay the stamp duty for them was actually in their interests.<{POST_SNAPBACK}> when aimed at FTBs the idea effectively gives the FTB a price cut to the value of the stamp duty......The benefit to the FTB is that the SD effectively goes on the mortgage which is better for his/her cashflow..........than simply getting a reduced price but having to pay the SD............... The benefit to the seller is that it might help shift a home in a slow market........ Quote Link to comment Share on other sites More sharing options...
right_freds_dead Posted March 18, 2005 Share Posted March 18, 2005 i dont know why this stamp duty debate is even being discussed. its a red herring. prices are off line with earnings. stamp duty doesnt even come into the equation when prices are 60% over the actual value. all it does is divert your attention to the real problem of affordability and over inflation. Quote Link to comment Share on other sites More sharing options...
Cityfool Posted March 18, 2005 Share Posted March 18, 2005 when aimed at FTBs the idea effectively gives the FTB a price cut to the value of the stamp duty......The benefit to the FTB is that the SD effectively goes on the mortgage which is better for his/her cashflow..........than simply getting a reduced price but having to pay the SD...............The benefit to the seller is that it might help shift a home in a slow market........ <{POST_SNAPBACK}> Problem is that it may not work in the SDLT era. Under the old stamp provisions there was no rule as to who paid the stamp duty (which was in that sense voluntary) it was just that the Transfer wouldn't be legally enforceable unless the SD was paid and since it is the buyer who is bothered about relying on the document (the seller has the cash and doesn't care) it was normally the buyer who would pay in practice but you could put a provision in the contract that the Seller would pay and the lender wouldn't mind as long as it got paid. SDLT on the other hand is a tax liabilty of the buyer and as such the lenders will tend to see the provision as a price cut. CF. Quote Link to comment Share on other sites More sharing options...
The Masked Tulip Posted March 18, 2005 Share Posted March 18, 2005 It is purely a marketing thing thought isn't it and probably aimed at people who, without meaning to be rude to them, don't really understand the mathematics of the financials. People will simply see 'something for nothing' and assume it is a good deal. Also, there are still plenty of people around who actually trust the likes of house firms, banks, etc, to do the right/best thing for them. Quote Link to comment Share on other sites More sharing options...
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