Buying Guide
About Discounted Sale
Local Authorities give planning permission to private developers and set a restriction, so some of the properties have to be sold at a discount from the open market value, this is known as a 'section 106 agreement'.
For example if the property has an agreed Open Market Value of £150,000 the housing association nominated by the Local Authority is allowed to purchase the property at a discount of say 40% off the OMV = £60,000 less OMV from the developer. The Housing Association is then allowed to market the property for discounted sale at 60% of the OMV = £90,000 (which provides the affordability of the purchase)
The 40% unsold equity is then retained in the property and the housing association is not allowed to charge rent on the 40% unsold equity. The resident only has to be concerned with their own mortgage payments and in some instance depending on the scheme development the resident may have to pay a monthly service charge.
Should the resident wish to sell their share of the lease , the housing association would require the resident to offer the property first back to the RSL., then should the RSL choose not to buy the residents share, the property can then be offered on the open market. Upon completion of sale the resident would receive 60% of the sales receipts and the RSL would receive 40% subject to the open market valuation at that time. Please note that all legal costs are the responsibility of the resident.
Benefits of owning your property through Discounted Sale
- Continue to own your initial share with no need to purchase further as the rest will be owned the housing association.
- No rent to pay on unsold equity (maybe a small service charge)
- Avoid paying stamp duty as long as the value of your home is under £175,000. (government legislation and subject to change)
- If the market rises and you decide to sell, you benefit from the open market value at that time.
How do I sell my shares in a discounted sale home?
How do I qualify?
The criteria is different for each scheme and is usually set by the Local Authority. The first priority is normally for those who live or work in the immediate area, but not always. If you are able to buy on the open market without help then you would not qualify. For example if your annual household income is more than £60,000 or if you have a deposit which is more than 15% of the value of the property we would need to know why you are applying for affordable housing.
How do I apply?
