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FSA warns against fraud in quick property sales

Your Mortgage
Written By:
Your Mortgage
Posted:
Updated:
20/11/2012

The regulator has warned consumers in arrears or about to be repossessed not to succumb to property fraud to get a quick, below market value sale for their property.

The Financial Services Authority (FSA) said: “Some homeowners facing financial difficulties may want to sell their property quickly to ease distress, or perhaps avoid repossession, and put the problems behind them.

The FSA said buyers can offer sellers discounts of 20 -35% below the market value of the property, alongside a promise to complete the deal within 48 hours, or in cash and to avoid estate agency fees.

The sale becomes fraud if the buyer asks the seller to state the property is being sold for the full market value rather than the discount agreed, it warned.

This way the buyer is getting a no-money-down property deal and the mortgage lender thinks a substantial deposit has been put down as security for the loan.

“The bigger the deposit paid by the borrower, the more likely their mortgage application will be approved and the lower the interest rate charged,” said the regulator.

For example, 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 (or 80% of the inflated price), the buyer may be able to access some or better mortgage deals.

The regulator suggested consumers should talk to their lenders first if they are struggling with mortgage payments and also warned against other options like Sale and Rent Back from unauthorised firms.

In May this year, Mortgage Solutions ran a story on no-money-down buy-to-let deals where buyers bought for knock-down prices or borrowed the deposit from a bridging lender and used two solicitors to achieve a fraudulent 100% mortgage deal.