Selling a Shared Ownership Property: What You Can and Can’t Do
Estimated reading time 7 minutes
Shared ownership has been a welcome government scheme for many as it finally gives people the chance to get that first foot on the property ladder. With the affordability of property often being the reason buying a house remains firmly out of the question, shared ownership shines a light on those ready to take the leap.
Once moved in though, what happens if, after a few years, you decide to sell? Can you even sell it if you don’t own all of it? Well, in this blog, we answer those questions and more so you know what you can do when selling a shared ownership property.
Shared ownership is a government scheme that helps people take their first steps on the property ladder. With a percentage of the property, normally 10%-75%, made available to buy, the required mortgage and deposit are much lower than if buying a home outright. This makes it an affordable option for those unable to save a significant deposit or secure a large enough mortgage. The remaining percentage is then rented from the housing association or council. So, in effect, you have two payments rather than one. A mortgage payment for the percentage you are buying and a rent payment for the remaining amount
The scheme allows the homebuyer to start with a small percentage of ownership, gradually increasing it over time if they wish. This process is known as staircasing, and in some cases, you can staircase all the way to 100% giving you full ownership of the home.
You can and if you own the full 100%, it is no longer a shared ownership home, therefore making it possible for you to sell on the traditional market or to a cash house buyer like normal. It is worth checking your paperwork though, some companies have specific rules about selling even if you own the property outright.
If you own less than 100%, you can still sell the home, but you are bound by more stringent rules. Below, we cover what you can and can’t do when selling shared ownership property. For the sake of this article, we are assuming you have less than 100% ownership.
Selling a shared ownership home has some very specific rules that you must follow. Trying to skirt around them will see you in breach of contract and various penalties issued. This could result in the sale being cancelled with no refund for the costs you’ve already covered.
Let’s start by looking at what you can do when you try and sell your shared ownership.
When you sell your home, you can only sell the share you own, the housing association will retain their share. You’ll need to notify the housing association of your wish to sell so don’t get any grand ideas of heading to the estate agent, getting a valuation of the entire property and hoping it sells.
Market the home via the housing association
As the housing association still has a vested interest in the property and a huge portfolio of interested buyers, you’ll first have to advertise it through them. Your housing association will have what is known as a nomination period. This is the time that they have to market the home before you can head to an estate agent to try and gain a sale.
Sell at market value
When you sell shared ownership property, you can sell it at market value only. You’ll get this price via an independent valuation that should be carried out by a RICS surveyor. With the figures provided by the surveyor, the housing association will provide you with a value based on your share. The valuation from the surveyor is only valid for three months so it must be given to the housing association right away. Should the home not sell in that time, you’ll need to book another survey.
Increase ownership before sale
Should you have saved some cash, you could staircase before you decide to sell and get more of the full value for yourself. You’ll need to check whether there is a limit as some housing providers will allow a full climb to 100% but others have it capped at 80%.
What you can do, as you saw above, is fairly standard stuff, what you can’t do when selling a shared ownership home though is a little more stringent. Let’s take a look.
Ignore the housing association
The housing association plays an essential role in the sale of your shared ownership home, and they must be informed of your intentions to sell. In some cases, they also have first refusal to source a buyer before you can take the home to the traditional market. As a result, you cannot sell your home without notifying them of your plan to sell. If you decide to ignore this, you’ll be facing a vast penalty and potential prosecution. In addition, if you manage to complete a sale without informing the housing association, the buyer could face legal challenges over their ownership, making a future sale practically impossible. It’s a legal obligation to inform the housing association so don’t put yourself at risk.
Sell below market value
Well, this one is a half-truth. You can sell below market value but only if you have been permitted by the housing association. In many cases, they will not approve this so it should be largely assumed that you cannot sell for below market value. Should you be desperate to sell and provide the housing association with justifiable reasons why lowering the price will be beneficial, they may allow it.
Sell without a valuation
You cannot sell a shared ownership home without obtaining a valuation from a RICs surveyor. You are not allowed to just come up with a price or use a price given to you by a high-street or online estate agent. It must come from the approved surveyor. And, as we said earlier, these last for three months so you may need to get multiple valuations if your house is not selling. Don’t just assume the initial valuation is ok if your home remains on the market after three months.
Sell to just anyone
The buyer of your shared ownership property must be someone who meets the eligibility of the shared ownership scheme. This includes limits on annual household income (currently £80,000. £90,000 in Greater London), proof of sufficient funds for the deposit and no ownership of any other property.
Once you reach 100% ownership, you can sell to anyone, although you should double-check the terms of the contract with the housing association.
Break any lease terms
There is still a rental share of the home that needs to be paid for. So, even though you are hosting viewings and may even have a buyer lined up, you must keep on top of any rent charges and service charges that apply to the property. Only once contracts are exchanged and the keys handed over can you absolve yourself of any financial attachment to the home.
Should you have successfully staircased to 100% and now find that you can sell via the traditional market, you can avoid the lengthy timeframes with a sale to Bettermove. We offer two quick and easy ways for your home to sell. We’ll either buy the house from you or present it to a vast network of cash house buyers. Either route to sale guarantees that your house will sell and with no legal fees to pay, you sell your house for free, banking the cash amount you get offered. Contact our team today to learn more about the better way to sell with Bettermove.
