Understanding Concessionary Purchases: Buying from Parents, Landlords, or Employers

If you are considering buying a home from your parents, landlord, or employer, you might be entering into what's known as a concessionary purchase.

This type of transaction occurs when the property is sold at a price below its market value, often with an element of 'gifted equity' involved.

In our latest blog, we look at what this type of purchase involves, the benefits, and what is required to be approved based on guidelines from lenders like Nationwide and Halifax.

What is a Concessionary Purchase?

A concessionary purchase is when a property is sold at a price below its market value. The seller—whether a family member, landlord, or employer—offers the property at this reduced price, often to get a quicker or more secure sale, or to help the buyer get on the property ladder. The difference between the market value and the purchase price is considered a gift of equity and can often be used as part of the buyer’s deposit.

Common Scenarios

1. Buying from Parents: Many parents choose to sell their property to their children at a discounted rate as a way to pass on wealth and help their children own their first home.
2. Buying from a Landlord: If you're a long-standing tenant, some landlords might be open to selling the property at a discount rather than putting it on the market.
3. Buying from an Employer: In some cases, companies that own properties may sell them to employees at a discounted rate as part of the job benefits or as an incentive scheme.

Benefits

• Reduced Price: The most obvious benefit is the lower purchase price, which can make buying a property more affordable.
• Lower Deposit: The gifted equity can sometimes count as your deposit, reducing or even removing the need to save for one.
• Simpler: Buying from someone you know can often mean agreeing the price of the property is simpler and so is the sales process.

Lender Terms

Not all lenders view these type of purchases the same way, and their terms can vary significantly:

• Nationwide Building Society states that a concessionary purchase is typically between family members. They require proof of the relationship and will consider the gifted equity as part of the deposit. They also have specific requirements regarding the valuation of the property and the minimum amount of equity being gifted.
• Halifax also recognises concessionary purchases and has criteria that must be met for the gifted equity to be considered part of the deposit. They often require a detailed breakdown of the property’s valuation and evidence that the buyer can afford the mortgage independently of the equity gift.

Steps to Take

1. Discuss with the Seller: Start by having an open conversation with the person selling the property. Understand their reasons and ensure both parties are clear about expectations.
2. Valuation: Have the property valued to ascertain its market value. This is crucial for mortgage applications and for understanding the equity being gifted.
3. Mortgage Application: Approach lenders who accept concessionary purchases and discuss your options. It’s advisable to work with a mortgage broker who knows the different lender criteria.
4. Legal Advice: Use a solicitor who can handle the legal side of the purchase, making sure that all the paperwork correctly reflects the arrangement. We can recommend one of our legal partners to discuss this with you.

Concessionary purchases can be a great way to buy a home at a discount, but they require careful consideration and planning.

Understanding the lender’s criteria and making sure you meet all the requirements is key.

Whether you’re buying from family, a landlord, or an employer, make sure you’re fully informed and prepared for what the process entails.

For more information on how to manage a concessionary purchase or to explore your mortgage options, feel free to contact us.

Think carefully before securing debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage or any other debt secured on it. A fee may be charged for mortgage advice. The exact amount will depend on your circumstances.