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this is my completion statement on a
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shared ownership flat where I walked
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away with over £
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107,000 3 years ago I bought my first
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home in London which was a two bed flat
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on a shared ownership scheme owning 40%
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recently I sold that flat and found a
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huge flaw in the shared ownership system
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which allowed me to walk away with over
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100,000 of equity despite only putting
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in £40,000 to start with it's all above
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board there's nothing legal but it's a
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really interesting problem with the
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whole government Shar ownership system
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this video isn't to brag or to flaunt
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the cash it's simply to highlight a huge
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problem in the shared ownership model
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and actually try and help anyone who's
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stuck in the shared ownership system
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with a property where they might not be
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able to sell it or they want to try and
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get some more Equity to move up in the
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property ladder I used to commute into
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London and into the city every single
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day before the pandemic and have done
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loads of videos on the channel about
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that but since Co have been working
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fully remote for the past 3 and a half
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years and because of that decided to
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quit my job at Lloyd's banking group and
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instead go fully remote at a tech
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startup the whole idea was to move out
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of London get more space get a garden
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get some fresh air and ultimately like
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many others post pandemic join the race
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for space and improve my quality of life
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rather than living in the center of a
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polluted city the problem is co really
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stalled the flat Market in London people
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didn't want small Flats in zones one and
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two and thus the market Market went very
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very flat with not much interest which
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makes it very hard to sell at a good
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price but I had to take the plunge and
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2022 was the year that I decided to sell
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the flat and try and get out of London
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for good to compare the difference from
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2012 to 2015 the London flat property
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Market surged in some areas almost 60%
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when I bought my flat it went up about
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1% every single year which was very very
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flat which is a shame because I bought a
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flat in London hoping to ride of what is
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one of the most incredible property
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markets in the world but instead got
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nothing if you're new to Shared
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ownership it's effectively a scheme
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where you can buy a percentage of a
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house it's great for those who can't
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afford a full property or particularly
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useful in London where prices are
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extremely extortionate rather than
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buying the whole flat you buy a
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percentage otherwise known as a share
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and you get a mortgage on your share and
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then you just pay rent on the share that
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isn't yours and the idea is that you can
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staircase to full ownership over a
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certain amount of time the reality is
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that unofficial figures say that about 5
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to 8% of people actually staircase to
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full ownership and the reality is the
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monthly cost is probably the same of
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owning the property completely outright
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with a mortgage but it helps
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affordability because you don't need as
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much of a deposit to finance the
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property to kick things off when you
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sell a shared ownership property you
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have to get a Ricks surveyor to Value
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the property and whatever that valuation
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say
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is then handed to the Housing
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Association who then take that price at
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face value and that's what the property
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has to be sold at now the first
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valuation that I got through was
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£575,000 which was about £7,000 more
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than what I bought it for that was a
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little bit yeah you know not very good I
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then challenged that same surveyor and
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they ended up raising the price to
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620,000 so there was some room for
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negotiation here because you have to
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remember as a shed owner I only get 40%
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of whatever that increase is so it was
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in my interest to maximize the value as
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much as possible and sell it at that
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price to another Shar owner through the
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system so let that sink in I managed to
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sweet talk a surveyor to go from 575,000
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up to 620 that's a huge jump and that's
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when I learned that Rick surveyor kind
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of go in the middle they can go lower
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they can go higher and they have some
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subjective room for movement as long as
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there's good so comparables in the area
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and in London where there's lots of
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flats there was definitely a broad
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spectrum of flats in the area being sold
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for different prices kind of depending
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on the quality so I handed that £
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620,000 valuation into the Housing
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Association who then came back the next
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day straight away giving me open market
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permission rather than sending it to
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another shared owner I could now sell it
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to a full owner with no shared ownership
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this is because the flat was too
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expensive because the government imposed
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income restrictions it's 80,000 outside
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of London and 90,000 inside of London
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based on all of the calculations that
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they use if a property is worth too much
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it means that no one can have a deposit
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big enough or small enough and have an
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income that's within the limits to
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afford a property of that size and
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therefore it becomes unsellable through
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shared ownership and then they give you
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permission to sell it on the open market
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which also means that you don't have to
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sell it at the valuation price you can
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choose any price on the open market this
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is is known as a simultaneous staircase
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and onward sale transaction where you
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use the buyer funds to staircase the
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flat toal ownership and then instantly
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sell it to them as that full share so
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they have no involvement with the
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Housing Association whatsoever it also
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meant that I didn't have to use any of
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my money to staircase from 40% to 100%
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to be able to sell the flat and get out
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of my own home so I did what any
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unreasonable person does in London and
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went to foxton's to try and get a quote
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on how much it would be to sell the flat
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and their rough estimate
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on the valuation of the flat now if you
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haven't heard of Foxton they are the
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classic villain in the London property
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Market with extortion at rental prices
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and rinsing people for money left right
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and center now I got a valuation from
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Foxton and bearing in mind I bought the
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flat at the end of 2018 for £ 567,000 on
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a 40% share foxton's said that they
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valued the flat at
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£550 that's almost
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£17,000 less than what I bought it for
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and here's the best bit they wanted to
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charge me over
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£19,000 in fees and vat for the
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privilege of selling my flat at a loss
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at this point I felt completely trapped
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I had the option to sell my flat at a
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loss and it would cost me a substantial
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amount of money to get out of the shared
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ownership system and to fundamentally
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move out of London to make matters worse
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when I spoke to the Housing Association
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about this they said that I had to sell
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the flat at the price of the valuation
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so I had to sell that flat for $620,000
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if I sold it for Less on the open market
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I would have to pay them the entire
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difference so if I had sold the flat for
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£550,000 I would owe the Housing
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Association £70,000 in cash which I did
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not have and then I asked them well what
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if I sell the flat for more than the
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valuation surely you don't keep the
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money or we don't split it surely that's
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my money and they said yes if I sell it
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quite rightly I get to keep all of that
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money which is the difference between
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the valuation and the sales price and
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then it hit me this was the light bulb
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moment if I could get an updated
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valuation from a rick surveyor that was
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low enough where I could then sell the
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flat at a reasonable amount on the open
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property Market I could pocket the
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difference in the middle and then I got
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thinking even more how far to the
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extreme could I push this to go from
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what is a £70,000 loss to potentially
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six figures so I paid for three
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valuations each costing around three 00
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now I asked these surveyors because I
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pay them privately to be as conservative
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as possible and actually ask them to
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give me the lowest possible amount they
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would be willing to give under their
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Ricks accreditation you see the benefit
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of paying for your own private valuation
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compared to when you have a mortgage the
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surveyors that work for banks are very
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very strict and there is no room for
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negotiation when you're paying for your
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own private valuation which is what
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happens with a Housing Association
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because you are their customer there's
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some wiggle room some negotiation in the
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price now the surveyors told me they
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typically go for a price in the middle
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meaning they can go down or they can go
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up because the whole thing is completely
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subjective now I had valuations ranging
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from £ 565,000 up to 620,000 and of
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course I went for the lowest possible
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this time round and asked that surveyor
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to go even lower and pushed him down to
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£ 560,000 that's £7,000 less than I
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bought the flat for 3 years prior so I
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handed the new valuation of 560k into
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the Housing Association which they have
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to accept and I still had permission to
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sell the flat on the open market for
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something more reasonable and realistic
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for the area now that's the valuation
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sorted now I had to sell the flat now I
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know that I wanted to avoid the estate
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agents for the expensive fees because I
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didn't own the entire flat so instead I
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used one of the online estate agents
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particularly strike to sell the flat for
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zero fees but still list the property on
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right move and zuper and instead I would
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do the viewings I would negotiate with
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the buyer and I would push the sale
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through to completion myself without the
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help of a true real estate agent after 3
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weeks I managed to get an offer for £
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620,000 which yes is £70,000 more than
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what Foxton said they would sell it for
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but 620k I think was a very fair market
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value in the area and the flat was very
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nice it had concierge it had a gym had
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beautiful gardens and a pond so it was
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more premium compared to others in the
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area and was fair so this meant that I
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would buy the flat for £ 560,000 as a
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total updated share and sell it for
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£20,000 thus keeping that difference in
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the middle between the 560 and the 620
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and of course to do this this was done
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through the solicitors using the buyer
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funds now the eagle-eyed people here in
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the comments might be wondering about
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stamp Duty because when you staircase a
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flat technically you're purchasing a
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property and thus stamp duty is due well
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when I bought the flat it was under 300K
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as a firsttime buyer So Paid zero stamp
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Duty on my 40% share I then claimed
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relief 34 on the stamp Duty land tax
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form now I've read lots of news articles
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on this and a lot of people have wrongly
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paid stamp Duty on a simultaneous
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staircase and exchange completion
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transaction that's because solicitors
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who are deciding to do this aren't tax
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experts and they're getting this wrong
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however in solic visors defense the
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guidance from hmrc is very very very
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poor on this subject matter relief 34 is
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a subale relief transaction which is
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where you need a subsale to happen to
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enable the true sale to happen which is
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exactly what happens in this scenario
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and means shared owners like myself
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don't have to pay huge amounts of stamp
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Duty on a share of a property that isn't
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ours okay so the final figures so I
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bought the flat for
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$567 ,000 at the start of 2019 on a 40%
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share so my share was £
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227,000 I bought the remaining share of
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the flat the 60% at a value of £
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336,000 on a full valuation of £ 560,000
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but this was then sold to the buyer at
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the full market value of £ 620,000
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meaning I bought my share at 560 and
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sold it at 620 simultaneously all on the
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same day thus pocketing the £57,000
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equity made between the 560 and the 620
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and factoring in my 40% share which
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creates that small difference but all of
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this was using the buyer funds so I
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bought the full value of the flat at a
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grand total of
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$563,000 and then instantly sold it for
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£ 620,000 thus keeping that £57,000 is
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equity for myself so you have £ 620,000
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from the buyer minus £ 336,000 for the
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value of the 60% part of the flat that I
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didn't own minus another
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$177,000 that I owed the bank back for
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the mortgage that leaves a total of
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£17,000 for me 40K of that was the
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original deposit that I put into the
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property 10k of that was Equity from the
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mortgage payments over 3 years and
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£57,000 of that was tax-free cash that I
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made purely and simply through the
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loophole of the shared ownership system
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and all of this is tax-free because when
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it's your own home home you don't pay
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capital gains tax on your primary
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residence that you live in and of course
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there was no stamp duty to pay because
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we used the subsale relief to ensure
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that the transaction was linked and
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therefore no sdlt was due on the
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staircasing part of the transaction
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because it was linked to the sale to the
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private buyer and lastly using strike I
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paid no estate agent fees whatsoever to
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sell the flat so zero cost there so the
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only thing I needed to pay was lease
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hold fees legal packs and then the
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solicitors fees on my end and there you
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have it I managed to walk away with an
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extra £57,000 completely taxfree from a
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relatively flat property Market in
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London hopefully if you're a shared
00:13:09
owner this has opened your eyes up to
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the potential to try and escape the
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system and make sure that you walk away
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with some kind of equity or profit now
00:13:18
everything is completely above board on
00:13:20
this and legal I just followed the
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system and played the game but it does
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feel like a huge fundamental loophole
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and flaw in the way shared ownership
00:13:28
works this only happened because I was
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able to sweet talk Rick's surveyors to
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get them to bump down the prices on the
00:13:34
valuations the fact that we used the
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subsale relief on the stamp Duty and
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used an online estate agent to
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completely minimize all of the costs and
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maximize the potential of the property
00:13:45
and it absolutely blows my mind that
00:13:47
this one transaction and this sale could
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have gone from a scale of a £70,000 loss
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to instead walking away with over
00:13:54
£100,000 and I was completely in control
00:13:57
of those scenarios I could have gone for
00:13:58
the fox valuation and sold it at a huge
00:14:01
loss but instead I saw the potential
00:14:03
spotted the loophole and rinsed it if
00:14:06
you enjoyed this video then check out
00:14:07
this one here which explains whether you
00:14:09
should buy a property now or wait until
00:14:11
next year diving into all of the bank of
00:14:13
England figures click on this video here
00:14:16
and I will see you in the next video
