FSA warns on quick sales
The FSA has issued a warning to those looking for a quick deal on a house sale that they may be at risk of fraud.
They have warned any homeowner to be wary of companies and individuals offering to help with a quick deal by buying the property at a discounted price.
The discount is often around 20% and can be as much as 35% below the market value of the property.
The buyer may call these below market value, BMV deals or distressed property sales.
These offers may include a promise to complete the deal within as little as 48 hours, pay the sum in cash, help you avoid legal and estate agent fees, and guarantee the sale.
The FSA has warned that some quick and discounted property sales involve fraud, where the buyer asks the seller to state that the property is being sold for the full market value rather than the discounted price agreed.
This is usually done so the buyer can borrow the full amount they have agreed to pay for the property from a mortgage lender, but the lender thinks they have paid a deposit for the property.
In the current market, mortgage lenders will not lend the full amount needed to purchase a property and will require a sometimes substantial deposit.
The bigger the deposit paid by the borrower, the more likely their mortgage application will be approved and the lower the interest rate charged.
So if the buyer is paying £120,000 for a property they might not be able to borrow the full amount they have agreed to pay, even if it has been valued at £150,000.
However, by telling a mortgage lender they are buying the house for £150,000 but only need to borrow £120,000, the buyer may be able to access some or better mortgage deals.
Misleading the lender in this way is fraud and both the buyer and seller could face prosecution. In addition, firms may offer solutions which appear to repay debts and allow owners to remain in their homes without selling immediately.
The FSA urges consumers to treat all schemes like this with caution and consult the consumer alert they issued last year on Lease Options and Exchange with Delayed Completion schemes.