How to sell shared ownership flat
I Made £110,000 From a Shared Ownership Loophole (Sold My Flat)
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this is my completion statement on a
shared ownership flat where I walked
away with over 107 000 pounds three
years ago I bought my first home in
London which was a two bed flat on a
shared ownership scheme owning 40
recently I sold that flap and found a
huge flaw in the shared ownership system
which allowed me to walk away with over
a hundred thousand pounds of equity
despite only putting in forty thousand
pounds to start with it's all above
board there's nothing illegal but it's a
really interesting problem with the
whole government shared ownership system
this video isn't to brag or to flaunt
the cash it's simply to highlight a huge
problem in the shared ownership model
and actually try and help anyone who's
stuck in the shared ownership system
with a property where they might not be
able to sell it or they want to try and
get some more Equity to move up in the
property ladder I used to commute into
London and into the city every single
day before the pandemic and have done
loads of videos on the channel about
that but since covid have been working
fully remote for the past three and a
half years and because of that decided
to quit my job at Lloyd's banking group
and instead go fully remote at a tech
startup the whole idea was to move out
of London get more space get a garden
get some fresh air and ultimately like
many others post pandemic join the race
for space and improve my quality of life
rather than living in the center of a
polluted city the problem is kovid
really stalled the flat Market in London
people didn't want small Flats in zones
one and two and thus the market went
very very flat with not much interest
which makes it very hard to sell at a
good price but I had to take the plunge
and 2022 was the year that I decided to
sell the flat and try and get out of
London for good to compare the
difference from 2012 to 2015 the London
flat property Market surged in some
areas almost 60 percent when I bought my
flat it went up about one percent every
single year which was very very flat
which is a shame because I bought a flat
in London hoping to ride some them of
what is one of the most incredible
property markets in the world but
instead got nothing if you're new to
Shared ownership it's effectively a
scheme where you can buy a percentage of
a house it's great for those who can't
afford a full property or particularly
useful in London where prices are
extremely extortionate rather than
buying the whole Flats you buy a
percentage otherwise known as a share
and you get a mortgage on your share and
then you just pay rent on the share that
isn't yours and the idea is that you can
staircase up to full ownership over a
certain amount of time the reality is
that unofficial figures say that about
five to eight percent of people actually
staircase to full ownership and the
reality is the monthly costs is probably
the same of owning the property
completely outright with a mortgage but
it helps affordability because you don't
need as much of a deposit to finance the
property to kick things off when you
sell a shared ownership property you
have to get a Rick's surveyor to Value
the property and whatever that valuation
say days is then handed to the Housing
Association who then take that price at
face value and that's what the property
has to be sold at now the first
valuation that I got through was 575
000 pounds which was about seven
thousand Pounds more than what I bought
it for that was a little bit yeah you
know not very good I then challenged
that same surveyor and they ended up
raising the price to 620
000 pounds so there was some room for
negotiation here because you have to
remember as a shed owner I only get 40
of whatever that increase is so it was
in my interest to maximize the value as
much as possible and sell it at that
price to another shed owner through the
system so let that sink in I managed to
sweet talk a surveyor to go from 575
000 pounds up to
620. that's a huge jump and that's when
I learned that Rick surveyors kind of go
in the middle they can go lower they can
go higher and they have some subjective
room for movement as long as there's
good soul comparables in the area and in
London where there's lots of flats there
was definitely a broad spectrum of flats
in the area being sold for different
prices kind of depending on the quality
so I added that 620 000 pound valuation
into the Housing Association who then
came back the next day straight away
giving me open market permission rather
than selling it to another shared owner
I could now sell it to a full owner with
no shared ownership this is because the
flat was too expensive because the
government imposed income restrictions
it's 80 000 pounds outside of London and
ninety thousand pounds inside of London
based on all of the calculations that
they use if a property is worth too much
it means that no one can have a deposit
big enough or small enough and have an
income that's within the limits to
afford a property of that size and
therefore it becomes unsellable through
shared ownership and then they give you
permission to sell it on the open market
which also means that you don't have to
sell it at the valuation price you can
choose any price on the open market this
is is known as a simultaneous staircase
and onward sale transaction where you
use the buyer's funds to staircase the
flat to full ownership and then
instantly sell it to them as that full
shares they have no involvement with the
Housing Association whatsoever it also
meant that I didn't have to use any of
my money to staircase from 40 to 100 to
be able to sell the flat and get out of
my own home so I did what any
unreasonable person does in London and
went to foxtons to try and get a quote
on how much it would be to sell the flat
and their rough estimation on the
valuation of the flat now if you haven't
heard of foxtons they are the classic
villain in the London property Market
with extortionate rental prices and
rinsing people for money left right and
center now I got evaluation from foxtons
and bearing in mind I bought the flat at
the end of 2018 for 567 000 pounds on a
40 share
foxtons said that they valued the flat
at 550 pounds that's almost 17
000 pounds less than what I bought it
for and here's the best bit they wanted
to charge me over 19 000 pounds in fees
and vat for the privilege of selling my
flats at a loss at this point I felt
completely trapped I had the option to
sell my flat at a loss and it would cost
me a substantial amount of money to get
out of the shared ownership system and
to fundamentally move out of London to
make matters worse when I spoke to the
Housing Association about this they said
that I had to sell the flat at the price
of the valuation so I had to sell that
flat for 620 000 pounds if I sold it for
Less on the open market I would have to
pay them the entire difference so if I
had sold the flat for 550 000 I would
owe the Housing Association 70 000
pounds in cash which I did not have and
then I asked them well what if I sell
the flat for more than the valuation
sure you don't keep the money or we
don't split it surely that's my money
and they said yes if I sell it quite
rightly I get to keep all of that money
which is the difference between the
valuation and the sales price and then
it hit me this was the light bulb moment
if I could get an updated valuation to
my Rick surveyor that was low enough
where I could then sell the flat at a
reasonable amount on the open property
Market I could pocket the difference in
the middle and then I got thinking even
more how far to the extreme could I push
this to go from what is a 70 000 pound
loss to potentially six figures so I
paid for three valuations each costing
around 300 pounds now I asked these
surveyors because I pay them privately
to be as conservative as possible and
actually ask them to give me the lowest
possible amount they would be willing to
give under their Rick's accreditation
you see the benefit of paying for your
own private valuation compared to when
you have a mortgage the surveyors that
work for banks are very very strict and
there is no room for negative
Association when you're paying for your
own private valuation which is what
happens with a Housing Association
because you are their customer there's
some wiggle room and some negotiation in
the price now the surveyors told me they
typically go for a price in the middle
meaning they can go down or they can go
up because the whole thing is completely
subjective now I had valuations ranging
from 565
000 pounds up to 620 000 pounds and of
course I went for the lowest possible
this time round and asked that surveyor
to go even lower and pushed him down to
560
000 pounds that's seven thousand pounds
less than what I bought the flat for
three years prior so I handed the new
valuation of 560k into the Housing
Association which they have to accept
and I still had permission to sell the
flat on the open market for something
more reasonable and realistic for the
area now that's the valuation sorted now
I had to sell the flat now I know that I
wanted to avoid the estate agents for
the expensive fees because I didn't own
the entire flat so instead I used one of
the online estate agents particularly
strike to sell the flat for zero fees
but still list the property on right
move and zoopla and instead I would do
the viewings I would negotiate with the
buyer and I would push the sale through
to completion myself without the help of
a true real estate agent after three
weeks I managed to get an offer for six
hundred and twenty thousand pounds which
yes is 70 000 pounds more than what
Foxton said they would sell it for but
620k I think was a very fair market
value in the area and the flat was very
nice it had concierge it had a gym had
beautiful gardens and a pond so it was
more premium compared to others in the
area and was fair so this meant that I
would buy the flat for 560 000 pounds as
a total updated share and sell it for
six hundred and twenty thousand pounds
thus keeping that difference in the
middle between the 560 and the 620 and
of course to do this this was done
through the solicitors using the buyer's
funds now the eagle-eyed people here in
the comments might be wondering about
stamp Duty because when you staircase a
flat technically you're purchasing a
property and thus stamp duty is due well
when I bought the flat it was under 300K
as a first-time buyer So Paid zero stamp
Duty on my 40 share I then claimed
relief 34 on the stamp Duty land tax
form now I've read lots of news articles
on this and a lot of people have wrongly
paid stamp Duty on a simultaneous
staircase and exchange completion
transaction that's because solicitors
who are deciding to do this aren't tax
experts and they're getting this wrong
however in solicitors defense the
guidance from hmrc is very very very
poor on this subject matter relief 34 is
a sub sale relief transaction which is
where you need a sub sale to happen to
enable the true sale to happen which is
exactly what happens in this scenario
and means shared owners like myself
don't have to pay huge amounts of stamp
Duty on a share of a property that isn't
ours okay so the final figures so I
bought the flat for 567
000 pounds at the start of 2019 on a 40
share so my share was 227
000 pounds I bought the remaining share
of the flat the 60 at a value of 336
000 pounds on a full valuation of 560
000 but this was then sold to the buyer
at the full market value of 620 000
pounds meaning I bought my share at 560
and sold it at 620 simultaneously all on
the same day thus pocketing the 57 000
pounds Equity made between the 560 and
the 620 and factoring in my 40 share
which creates that small difference but
all of this was using the buyer's funds
so I bought the full value of the flat
at a grand total of 563
000 pounds and then instantly sold it
for six hundred and twenty thousand
pounds thus keeping that 57 000 pounds
is equity for myself so you have six
hundred and twenty thousand pounds from
the buyer minus 336 000 pounds for the
value of the sixty percent part of the
flat that I didn't own minus another 177
000 pounds that I owed the bank back for
the mortgage that leaves a total of 107
000 pounds for me 40K of that was the
original deposit that I put into the
property 10k of that was Equity from the
mortgage payments over three years and
fifty seven thousand pounds of that was
tax-free cash that I made purely and
simply through the loophole of the
shared ownership system and all of this
is tax-free because when it's your own
home you don't pay capital gains tax on
your primary residence that you live in
and of course there was no stamp duty to
pay because we used the sub sale relief
to ensure that the transaction was
linked and therefore no sdlt was due on
the staircasing part of the transaction
because it was linked to the sale to the
private buyer and lastly using strike I
paid no estate agent fees whatsoever to
sell the flat so zero costs there so the
only thing I needed to pay was leasehold
fees legal packs and then the solicitors
fees on my end and there you have it I
managed to walk away with an extra 57
000 pounds completely tax free from a
relatively flat property Market in
London hopefully if you're a shared
owner this has opened your eyes up to
the potential to try and escape the
system and make sure that you walk away
with some kind of equity or profit now
everything is completely above board on
this illegal I just followed the system
and played the game but it does feel
like a huge fundamental loophole and
flaw in the way shared ownership works
this only happened because I was able to
sweet talk Rick's surveyors to get them
to bump down the prices on the
valuations the fact that we use the sub
sale relief on the stamp Duty and used
an online estate agent to completely
minimize all of the costs and maximize
the potential of the property and it
absolutely blows my mind that this one
transaction in this sale could have gone
from a scale of a seventy thousand
pounds loss to instead walking away with
over a hundred thousand pounds and I was
completely in control of those scenarios
I could have gone for the foxton's
evaluation and sold it at a huge loss
but instead I saw the potential spotted
the loophole and rinsed it if you
enjoyed this video then check out this
one here which explains whether you
should buy a property now or wait until
next year diving into all of the bank of
England figures click on this video here
and I will see you in the next video
