How To Sell A Shared Ownership Property
If you’re looking for a fast way to get on the property ladder, but you don’t have a lot of money to spend, you may want to consider a shared ownership property. According to UK government statistics, nearly 202,000 people live in shared ownership properties. As with traditionally owned properties, you can sell your stake in a shared ownership property. It does, however, take a few extra steps. This guide can help you better understand the process.
What Is A Shared Ownership Property?
It may first help to define the properties that fall under this terminology. Shared ownership is a housing scheme that allows individuals to purchase a share of a property while paying rent on the remaining portion. It is designed to help people who may not be able to afford to buy a home outright on the open market.
Under shared ownership, a buyer purchases a percentage (typically between 25% and 75%) of the property from a housing association or a private developer. The remaining share is owned by the housing association or developer, and the buyer pays rent on that portion.
Not everyone, though, is eligible for this kind of home ownership. The UK government says that to be eligible, you must own less than £80,000 per year. What’s more, though, is that you must be a first-time property buyer. Additionally, you must buy between 25% and 75% of the property. You cannot own more or less than that. The rest of it has to come from a local authority or housing association.
Is Shared Ownership a Good Idea?
In most cases, the answer here is yes. There are several different reasons people choose to buy into a shared ownership property. Maybe the biggest reason people choose this method of home ownership is that it means individuals can get onto the property ladder with a lower deposit and mortgage than if they were purchasing a property outright. Buyers can start with a share as low as 25% and gradually increase their ownership through staircasing. That, of course, translates to lower monthly costs. Compared to renting a similar property on the open market, the monthly costs of shared ownership can be far more affordable. The mortgage payments on the owned share are often lower than market rent for a similar property, making homeownership more accessible to those who could not traditionally afford it. On top of that, though, is the fact that unlike renting a property, in this situation, you’re building equity. As the shared owner makes mortgage payments and potentially purchases additional shares, they build up equity in the property. This can provide a sense of financial stability and the opportunity to benefit from any future increases in property value. Shared ownership also offers more stability than renting, as long as the buyer continues to meet their mortgage and rent payments. It provides the security of living in a home they partially own, offering a sense of stability and belonging within a community. Furthermore, shared ownership properties are often available in sought-after areas where purchasing a property outright may be financially challenging. This allows buyers to live in desirable locations and benefit from the associated amenities and infrastructure. Finally, shared ownership properties are typically managed by housing associations or private developers, providing support and guidance throughout the homeownership journey. They can offer assistance with repairs, maintenance, and guidance on the staircasing process.
What Is Staircasing?
A key part in any discussion of shared ownership property benefits is the fact that owners can staircase to help build additional ownership in the property. Staircasing is a term that means shared owners can buy added shares in the property to help reduce the amount of rent they pay and move toward full ownership of the property. That means they get greater control over the property as well as fewer overall costs.
Cons of Shared Ownership
There are many great benefits to participating in a shared ownership scheme, but there are absolutely a few downsides to this option, too. Maybe one of the biggest is that not every property is available under this scheme. Instead, the number of properties can be fairly limited. That gives buyers far fewer options, and they may have to make some compromises when they purchase a home. They may not get a location they like, or they may have to forego certain property features. The other downside is that shared ownership automatically translates to shared responsibilities with the housing association. That may mean that a shared owner doesn’t have the right to alter the property the way he or she sees fit. Instead, they may have to get permission for some kinds of changes. There could also be shared maintenance costs which could add to the overall expense of owning this kind of property.
Staircasing can be a bit problematic, too. While staircasing allows shared owners to increase their share of the property over time, the process involves additional costs. This includes valuation fees, legal fees, and potential mortgage arrangement fees. The expenses associated with staircasing can add up, making it important to factor in these costs when considering the long-term affordability of shared ownership.
One of the most frustrating drawbacks, though, is the key subject in this post – how to get out of a shared ownership property. Shared ownership properties often come with restrictions on selling. Housing associations or developers usually have the right of first refusal to sell a shared ownership property, meaning they may have the opportunity to find a buyer before the shared owner can sell on the open market. This can potentially limit the ease and speed of selling the property.
How To Sell A Shared Ownership Property
If you decide to purchase a shared ownership home, you’ll need to know a few things. First, know that selling a shared ownership property can happen whenever you want it to. If you’re at a point where you completely own the property, you can sell it as you would any other property. If you don’t own 100% of the property, though, understanding the answer to “How does shared ownership work when you sell?” is a bit more complicated. The council or housing association that owns the other shares of your property will likely attempt to find a buyer first. In most cases, these are going to be other first-time buyers who are interested in a shared-ownership situation.
Ready to list? The first lesson in how to sell shared ownership properties is reviewing your lease. Each local authority and/or housing association has carefully listed its process for selling a home that is under shared ownership. The lease details that process. Selling shared ownership properties means following the procedures that are listed there. It will also tell you more about how to value the home and who will pay the expenses involved with selling. Moreover, it should tell you about restrictions that might be in place when you decide to sell.
The next step in the process to sell a shared ownership home is contacting the council or housing association that owns the other shares of the property. They will make efforts to find a buyer for your shared ownership property within approximately eight weeks. They will handle the marketing process and cover the associated fees, which typically range from £300 to £400. This includes expenses for advertising, floorplans, and photographs.
The housing association will coordinate convenient viewing times for potential buyers. If a buyer is interested, they will need to meet the necessary mortgage requirements for purchasing the property. We’ll talk a bit more about those requirements a potential buyer will have to meet a bit later in the article.
If a buyer cannot be found through the housing association’s efforts to locate one, you have the option to sell your shared ownership property using an estate agent. However, it’s important to note that the estate agent will need to find a buyer who is willing to purchase a shared ownership home, as you do not own 100% of the property.
Once you’ve contacted the housing association, it’s time to start filling out the paperwork. You’ll need to complete any forms required of you like an intention to sell form and the selling guide the housing association gives you. You will need to pay a fee to market your property, which is usually somewhere between £300-£400. Additionally, you’ll need to obtain an energy performance certificate if yours is no longer valid. In the UK, you cannot sell a home without one.
The next step is to prepare your home for sale. Start by thoroughly cleaning your home, including all rooms, carpets, and windows. Decluttering is also essential to create a more spacious and organised environment. Remove personal items, excess furniture, and any unnecessary clutter to showcase the home’s features. Then, address any visible repairs or maintenance issues, such as leaky faucets, broken light fixtures, or damaged walls. Ensure that everything is in working order and fix any minor issues that may deter buyers. You may also want to consider repainting walls in neutral colours to appeal to a wider range of buyers. Remove personal photographs, unique artwork, and personal decorations to allow buyers to envision themselves living in the space. Don’t forget about the outside of your home in this process. First impressions matter, so be sure you focus on improving the exterior of your home at some point. Trim hedges, mow the lawn, clean the driveway, and add some potted plants or flowers to create an inviting entrance.
Once you’ve done that, it’s time to hire a photographer to capture high-quality images of your home for marketing purposes. They can be used online and in other marketing materials. In most cases, the housing association will have a list of photographers you can use for these images.
A big part of the marketing materials will be the price itself, and that’s often one of the hardest parts of selling any home. Worried about pricing your home? Because this is a shared ownership property, you’ll have to get market value for the home. To establish market value for your home, you’ll need to use an independent RICS surveyor, your housing association or council will have a list of approved surveyors you can use. The cost here runs between £250 and £500, and you will have to pay all of that on your own. At that point, you’ll begin working with a conveyancing solicitor to start the legal process of transferring ownership.
At that point, you’ll start showing your home to potential buyers. After you get an offer on the home, those potential buyers will receive a reservation form and participate in the selection and allocation process facilitated by the housing association.
Once a successful applicant is chosen and receives an offer letter, they will be required to pay a non-refundable reservation fee. This fee provides reassurance to the seller, as it confirms the buyer’s genuine intent to purchase the property.
The buyer will then need to consult with a mortgage adviser to secure a mortgage that enables them to afford their share of the property.
A memorandum of sale will be issued to all parties involved in the sale process, signifying that the sale can proceed. Subsequently, the solicitor will commence the necessary legal work to transfer the lease of the property. At that point, the home is essentially sold.
Are Shared Ownership Properties Hard To Sell?
Selling a shared ownership home can be a smoother process compared to selling a property you fully own. One reason that’s usually the case is that the council or housing association often provides a list of those people you need to use to complete the sale of your home like photographers and surveyors. They also offer you essential buyer information, including the leasehold information form.
That doesn’t mean that the entire process, though, is easier. For example, you will be responsible for your legal fees as well as the housing association’s fees when selling the shared ownership property. Additionally, you will need to pay for the Leasehold Information Form, which typically costs between £200 and £300. It provides important details about the leasehold, including audited accounts for up to three years, service charges, building insurance documents, and fire safety reports.
Moreover, you will need to complete the TA6, also known as the property information form. This form contains extensive information about your home for potential buyers, including property boundaries, details of any disputes, past building works, information about listed or conservation area status, and utility supply details.
Warranties and guarantees for electrical work, roofing, damp proofing, windows, and central heating will also be included in this form.
The sales process will also involve the TA10, which is a fixture and fittings form. This document specifies what is included and excluded from the property sale, such as radiators, the boiler, carpets, cupboards, and curtains. It is a legally binding part of the sales contract, and it’s important to accurately represent what will be included to avoid legal consequences.
It’s crucial to work closely with your solicitor throughout the sales process to ensure that all necessary forms are completed accurately and to address any legal obligations associated with selling a shared ownership property. While it’s not necessarily harder, it does involve some extra steps you might not expect.
Ready to Make the Sale?
If you’re ready to sell your shared ownership property, the time has never been better to do so. Pull out your lease and begin reading so you know what to do next.