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15-01-2008, 12:12 AM
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Vendor gifting or incentives
Does anyone know how vendor gifting/incentives work or if anyone has come across this before?
My house is being marketed for OIRO £215K. I've now been approached by a prospective purchaser who is keen to buy it. However, he has taken a rather unorthodox approach in attempting to raise the finance. He's intention is to purchase my property by using 'no money down' -by having my property's valuation inflated to £250K. He's confident the valuation will be very near his inflated figure. He claims he will then give me £220K for my troubles and I will in effect 'gift him back' £30K, therefore in effect he is obtaining a little over 100% financing. I wish to know what my tax position will be regarding the 'gifting' element of the transaction and has anyone used this method before. I believe it's legal using some loophole with regard to this 'gifting' element but would like to receive some solid advice. Many thanks 
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16-01-2008, 01:18 PM
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I'd seek professional advice on this - firstly an accountant, then a solicitor. There's something about this that just doesn't ring right.
For a start, a mortgage will not normally be lent above a property's value. The reason being, that if the mortgage payments are not kept, the lender can get their money back via sale of the property. However, if the mortgage amount is in excess of the actual market value, the bank is always going to risk losing money on the transaction - and that doesn't make sense. If someone approched me with a similar offer, I would either reject it outright, or else raise the price to £250. 
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24-01-2008, 07:40 PM
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The proposal is mortgage fraud pure and simple. If the buyer is found out he will go to prison and OP would be an accessory and face penalties too.
Buyer's solicitor would be struck off for being party to it. He has a duty to refuse to act, or reveal all the details to the lender. If having had the details revealed the lender is silly enough to proceed then there's no fraud, but how likely is that? As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients Last edited by Richard Webster; 24-01-2008 at 07:40 PM. Reason: word repeated
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