General (main property discussion here) - Gifted deposits

Does anyone know how vendor gifting/incentives work or if anyone has come across this before?

My house is being marketed for OIRO £215K. I've now been approached by a prospective purchaser who is keen to buy it.

However, he has taken a rather unorthodox approach in attempting to raise the finance. He's intention is to purchase my property by using 'no money down' -by having my property's valuation inflated to £250K. He's confident the valuation will be very near his inflated figure. He claims he will then give me £220K for my troubles and I will in effect 'gift him back' £30K, therefore in effect he is obtaining a little over 100% financing. I believe the term for this is called 'Gifted deposits'.

I wish to know what my tax position will be regarding the 'gifting' element of the transaction and has anyone used this method before.

I believe it's legal using some loophole with regard to this 'gifting' element but would like to receive some solid advice and get some real insight to how this works.

Please help!!!

Many thanks

As long as the property values up, then this is legal. However why and how would the property value up by more than 35K. Err does this mean the agents have undersold your home?

does not matter as long as you get what you want then go for it. Its all legal as some lenders do gifted deposits.

Hi I have read most of the thread on this but I am still not getting it. So you want to buy a new build for £100k and you ask for a 15% gifted deposit. Which means effectively you have only paid £85K. Then when it completes your mortgage is for £85K? £100k? What about cash back - how does that work. Would a developer give you 15% cash back - so you go through the motions of buying at £100k but you get £15k back from the developer on completion??

Sorry if I am being a thicko!

In simple terms... a developer wants £85K for a property, he tells everyone they cost £100K.

You apply for mortgage of 85%, the developer says he is paying the deposit of 15%.

In essence, you get a 100% mortgage... its a scam, but a legal scam.

You will find that most lenders are shying away from the gifted deposit arena now. New build flats are viewed with particular suspicion for the reasons Bill mentioned. They are not all scams but tend to get tarred with that brush.

Alan

http://www.atlas-mortgages.co.uk

I have sold properties to investors with 15% off the market value and with a small amount towards legals. If closed bridged it does work out as a no money down deal and also if you buy and then remortgage. This works really well on resale homes only as long as the value is there, but I personally would not do it on new build flats.

There are loads of different ways to fund a property purchase for example we recently purchased with 15% off the mkt value by using a credit card cheque to fund the deposit. We did some small works to the property (internal facelift) and then remortgaged with a different lender to a higher value. On drawdown of the new mortgage it paid for the works and the deposit needed thus immediately paying off the credit card cheque. The property cost me £125.00 in total ! My advice stay away from gifted deposit new builds and do it on ressale homes only