Shared Ownership and Staircasing
Shared Ownership is an affordable housing scheme under which homes are made available through Housing Associations where typically initially shares worth between 25% and 75% of the property’s market value can be purchased, paying a subsidised rent on the remaining share stock. Additional shares can normally be bought to bring the total up to 100%.
When buying an additional share, it is a requirement that a formal valuation report be obtained from an RICS Registered Valuer who will assess the current market value of the property, to exclude the value impact of improvements made to the property at the share owner’s expense and which the landlord has accepted as being qualifying improvements. Alternatively, if the share in the property is to be sold this will also require a formal valuation report by a RICS qualified Valuer, however for this purpose the value benefit of any improvements can be taken into account.
Help to Buy – paying back the Government’s share
Formal valuations are also required under the Help to Buy scheme when reselling, but this can often be overlooked until the last minute.
Help to Buy is an equity loan scheme aimed at providing assistance to homebuyers by providing an initially interest free loan (subject to certain qualifying conditions and limits) to put with the buyer’s deposit (a minimum of 5% of the property’s value) so as to provide encouragement to mortgage lenders to make available a wider range of mortgage products. If a home owner wants to sell their ‘Help to Buy’ home the loan received to purchase the property will have to be repaid when it sells, unless of course it has already been repaid. If the maximum 20% loan was received to assist with the original purchase then 20% of the market value of the house will have to be paid at the time of sale to cover the repayment. It is at the point that a formal valuation by an RICS Registered Valuer is required to verify that the price achieved truly represents the open market value at that point in time. The valuation requirements are prescriptive and need to satisfy the following criteria:-
Responsibility for the Valuer’s fees lies with the home owner and if the transaction does not legally complete within a period of three months from the date of the valuation report a further report will be required. This may be undertaken as a desk top valuation by the surveyor who originally inspected the property but then has to be submitted within two weeks of the original valuation report expiring.
The requirement for a formal valuation from an RICS Registered Valuer also applies where the homeowner is not selling but wishes to repay the Government Loan.
To discuss your requirements in respect of the above, or other valuation matters, please contact Lloyd Smale (FRICS, RICS Registered Valuer) here at Carter Geering: firstname.lastname@example.org, Mobile 07535099660, Office 01363 773757.
Carter Geering – providing valuation advice across Devon and the wider South West.