When to use Yellow Apricot - Co buyers |
YELLOW APRICOT WORKING FOR CO-BUYERS
With property prices continually rising, an increasing number of people are unable to jump onto the first rung of the property ladder. This may be due to reasons like not being able to save a sufficient deposit or the current income being too low or both.
Recently, a phenomenon that is more popular in America has resulted in family, friends or total strangers getting together in groups of two and up to four and buying a property together. The advantage here is that all the people's incomes are taken into account when assessing whether or not to lend by the lender and with everybody's money pooled together, a larger deposit is available. Such people are called Co-buyers as they are co-buying a property. Some agencies have even been set up similar to dating agencies but instead of dating people as possible partners, people are dating each other as possible co-buyers!
It is important that a Legal Agreement is put into place protecting all co-buyers, indicating who pays what, what happens in the case of disputes, what if somebody wishes to sell, what if somebody fails to pay his/her part of the mortgage and so on. Normally the co-buyers agree to sell the property in 2-3 years time and to split the proceeds so that they can use their individual shares to buy a property individually.
Example:
Kate Coe lives with her parents in their council house in London and works in an office as a Secretary nearby, earning £18000 per annum. She is 21 now and under pressure to move out and buy her own place. But she has been saving since she was 18 and although she has savings of £5000, there is nothing in London that she can afford to buy. Her prospects in her job are good and she does not wish to leave her job to move out of London .
One day she is reading a magazine during her lunch break and she comes across an advertisement from a girl looking for a co-buyer. She telephones this person, called Jane Biya. They later meet for a drink. Jane is an assistant manager earning £22000 and has savings of £8000. They get on so well that they decide to look for a property to buy jointly.
They notice that the Yellow Apricot Auction site has 10 easy steps for first time buyers and the girls work out the figures as follows:
• Maximum mortgage = (18000+22000) x 2.5
= £100000
• Maximum purchase price = 100000 x 1.1
= £110000
• Minimum deposit = 110000 - 100000
= £10000
• Reality check - They have £13000 cash in total, which will cover the deposit and purchase costs of the property. They have seen properties sold for between £100000 and £120000 in London recently, so their expectations are realistic.
• Research - There are flats advertised in the next Yellow Apricot Auction with guide prices ranging between £70000 and £120000, so their target price of £110000 is optimistic. They go to their local IFA who agrees a mortgage for them in-principle with a high street lender. The also go to their local solicitor to draw up a formal Agreement as co-buyers and get the flat they are interested in valued. The valuation of the flat is in the region of £115000 but as it needs a bit of work doing on it, it is likely to go for nearer the guide price of £110000.
• Registration - they visit the Yellow Apricot website and register as bidders at the next Yellow Apricot Auction.
• Bidding at Auction - they eagerly bid on their chosen lot on Auction day and the flat they are interested in sells to them for £104000. They are excited as they have ended up getting the flat for £6000 less than the guide price!
• Memorandum of Sale - they quickly sign the memorandum of sale and send it back to Yellow Apricot and take a copy of the Memorandum of Sale to both their solicitor and their IFA. They pay for the searches and the IFA proceeds with the mortgage application.
• Completion - they then arrange for the balance of monies due to their solicitor to be forwarded just before completion. Don't forget stamp duty and your solicitor's fee.
• 28 days later - the property belongs to the co-buyers!
After putting in a new kitchen and bathroom, central heating and redecoration, the girls get their property valued from a local agent after 3 months and the property gets valued at £125000. Having bought the property for £104000 and spent £6000 doing it up, if they were to sell now, they would make £15000 before fees. Not bad for 3 months work is it?
The co-buyers are off to a flying start!
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