Dear John,
Been hearing a lot of talk about buying property from distressed sellers and I am wondering about the legality of this process when the vendor is offered a 20 -30% lower price than the omv of say £100k. I have been told that there is a way of buying such a property by taking a business loan/bridging loan for the deposit which is then paid back by the vendor on completion meaning that there is very little / or none of the purchasers money left in the deal. The valuation is based on the omv and solicitors are instructed on this figure. Sometimes it is said that a letter has to be signed by the vendor agreeing to this... and the solicitor/s have to be chosen by the purchaser - is this all legal?. We have also been reading about sub sales but not sure about the legalities of these either. We are keen to increase our btl portfolio as our cash deposits are running out..but don't want to go along this route if it is not completely ok.
Cheers
Gill

Hi Gill

I am sure that John has his own opinions which will mirror mine but, in short, you are right to be concerned. The concept of NMD (no money down) is one that is frequently banded around but, at its core, are smoke and mirrors in an effort to persuade a lender that the transaction is at full value.

It is not unusual for agents to recommend solicitors but it is not for anybody to insist a certain solicitor is used as this would prejuduce our overriding principle of independence and duty of care to the ultimate client. Again, an insistence that a panel solicitor is used at all costs is a warning sign that not all is at it should be.

Having said all this, the mechanics of a BMV Sale and a Sub Sale are all legitimate practices but it is how they are used with conventional mortgage lending that brings about the problems. Unfortunately cash is king!

Julian