Shared ownership (Help-to-Buy)
Background
Shared Ownership is also known as Help-to-Buy. It is a scheme that is backed by the government to provide affordable housing for those who cannot afford a full mortgage.
Under the scheme a purchaser can buy a ‘share’ of a property. This share is usually between 25% – 75% of the property’s value. The purchaser will in effect be a leaseholder and pay rent to the housing provider (usually a Housing Association) on the remaining share.
Although the purchaser initially owns only a share of the property, there is an option for them to incrementally increase that share until they own 100% of the property. This method of gradually purchasing the property is known as staircasing. As the purchaser increases their share of the property the corresponding rental payments will reduce until they own 100% of the property and become the freeholder.
Not everyone is eligible to purchase a property under the shared ownership scheme. It is only available to people who can show they have a certain income or limited financial resources. This helps to prevent more affluent purchasers taking advantage of the scheme.
Selling a Shared Ownership Property
At some point you may wish to sell your share of the property. Housing Associations will, however, have a number of requirements that you will need to meet in order for you to sell your share.
Firstly, you will have to pay off any outstanding rent on the property before it can be put on the market.
It is also likely that the Housing Association will stipulate that they are given at least eight weeks to sell the property before you can have the option of choosing your own estate agent to sell the property on the open market.
Who sets the value of my Shared Ownership home?
If the Housing Association is selling your property, the value at which your property is put on the market will have to be decided by an independent Valuation Surveyor who is a member of the RICS.
You may not agree with the value that the surveyor comes up with, however, when the Housing Association is managing the sale, you can only sell it at the value set by the RICS surveyor – it cannot be sold for a higher or lower price.
Can I sell just a proportion of my share of the property?
No. If you decide to sell your shared ownership property you will have to sell the entirety of your investment in the property – not just fraction.
What if my housing association is unable to sell the property?
If, after the allotted time, your Housing Association has been unable to sell your property, you are entitled to approach an independent estate agent to sell the property on the open market.
In this instance you can sell 100% of the entire value of the property, even if you only own a small portion. This is through a process known as back-to-back staircasing. This means that as soon as the property is sold, the funds from the sale will go to increase your share of the property to 100%. The housing association is then paid back what they are owed.
By selling the property in this way on the open market you may be able to accept offers that are over the market valuation set by the RICS Valuation Surveyor. You will not, however, able to accept any offers that are lower than the figure set by the surveyor.
Are there any other criteria?
Yes. Every Housing Association has their own criteria, and it will be best to check all the details before you consider selling.
One of the main criteria that is set by the Housing Association is the suitability of the prospective purchaser. It is very important that affordable homes are reserved for people on low incomes or limited financial resources. It is likely that your buyer will need to meet certain financial criteria and possibly be a first-time buyer. Potential purchasers are therefore required to pass an interview with an independent financial advisor to ensure that they are eligible to buy the property.
Going forward…
As you have probably gathered by now, selling a shared ownership property is slightly different to a normal sale. If you do end up selling the property on the open market it is extremely important that you appoint an experienced estate agent.
David Cosby estate agents are regulated by the RICS and have surveying and legal expertise. If you would like to discuss any aspect of selling a shared ownership property in more detail, then please do call us on 01327 361664 or 01604 979628.