How to sell a shared ownership property UK
Selling a shared ownership property explained
Table of Contents
If you’re a shared owner looking to sell shared ownership home and wondering ‘how to sell shared ownership’ then you’re in the right place! Selling a shared ownership home involves several steps, from deciding to sell your home to completing the sale with your buyer.
As a shared owner, when you want to sell your home, it’s important to effectively market your home to attract the right potential buyers. The beauty of shared ownership is that it provides an affordable home option, helping many people get onto the property ladder.
If you’re considering selling shared ownership property, it’s important to understand the layers of the process. This guide will walk you through each step, from how to sell your shared ownership property, the costs associated with the process and the most common questions.
What is a shared ownership property?
Shared ownership is a government-backed scheme aimed at assisting first-time buyers in climbing the property ladder. It enables you to purchase a portion of a home, usually between 10% and 75% of its full market value, while paying rent on the remaining share to a housing association or local authority.
One of the important features of shared ownership is the ability to increase your ownership stake over time through a process known as staircasing. Most shared ownership agreements allow you to staircase up to 100%, thereby achieving full ownership. However, some leases have a cap at 80%, maintaining the affordability and availability of these homes for other potential buyers in need.
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Can you sell a shared ownership property?
You are entitled to sell shared ownership property at any point but the process differs slightly depending on how much of the property you own.
If you’ve staircased to 100%, the sale process is similar to that of any other property. However, it’s always wise to review your contract for any specific terms or conditions.
If you own less than 100%, the housing association or local authority that owns the remaining share has a right known as first refusal. This means they have the initial opportunity to buy back your share or find an eligible buyer.
The duration of their right to find a buyer is set during the agreed nomination period, which will usually last four, eight or twelve weeks, depending on your property’s specific agreement. If they are unable to find a buyer within this period, you are then free to market and sell your share on the open market.
How do you buy out of a shared ownership property?
Staircasing while owning shares in a shared ownership property refers to the process by which a homeowner can gradually increase their share of the property over time. Here is how staircasing works:
When you first buy a shared ownership property, you purchase a specific share of it. This is often a more affordable option for many people as it requires a smaller mortgage and deposit compared to buying a home outright.
Over time, you have the option to buy more shares in your property. This process is called staircasing. The cost of the additional shares is based on the market value of the property at the time of the purchase, not the value when you first bought it.
As you buy more shares, the proportion of rent you pay on the remaining share decreases. For instance, if you initially owned 50% of your home and then staircase to own 75%, you would only pay rent on the remaining 25%.
In many cases, you can staircase up to owning 100% of your home, at which point you become the outright owner and no longer have to pay rent on the property. However, some shared ownership properties have restrictions that cap staircasing at a certain percentage, such as 80%.
Each time you staircase, you will likely incur costs such as valuation fees (to determine the current market value of the property), legal fees, and potentially additional mortgage arrangement fees.
Increasing your share of the property can also affect your rights and responsibilities, such as being able to make certain decisions about the property without the housing association’s consent.
How to sell shared ownership property UK
If you are wanting to sell shared ownership property in the UK, the process is fairly similar to selling a normal house, except you may have the assistance of the Housing Association or Local Authority.
Here is our step by step guide to selling shared ownership property:
Understanding your lease
- Begin by thoroughly reviewing your lease. Each housing association or local authority has specific rules for selling shared ownership properties. Ensure you understand all the processes, financial responsibilities and any potential restrictions.
Notify your Housing Association or Local Authority
- You will need to inform your local authority or housing association of your decision to sell. This is also the perfect time to clarify the nomination period – which is the duration you must wait before you can independently market your property if they haven’t found a buyer.
Valuation and Energy Performance Assessment
- Arrange for a RICS qualified surveyor to value your property. You can choose a surveyor from the housing association’s recommendations or find one independently.
- Remember, the valuation report is valid for three months, and a revaluation is necessary if the property doesn’t sell within this timeframe. Also, check if you need a new Energy Performance Certificate (EPC) for your property.
Completing the necessary paperwork
- Once satisfied with the valuation, complete and return the ‘intention to sell’ form to your housing association or local authority. Prepare to provide details of your conveyancer or solicitor, experienced in Shared Ownership sales, along with your lease, FENSA Certificates and other documents. Be prepared for a marketing fee to cover the cost of advertising your property.
Marketing your property
- The housing association will exclusively market your property during the agreed nomination period, using their platforms and reaching out to potential buyers. If they are unable to find a suitable buyer within this period, you can then market the property independently or through an estate agent, keeping in mind the specific criteria for Shared Ownership buyers.
Formally instructing a solicitor
- Once a buyer is found, either through the housing association, local authority or the open market, instruct your conveyancer or solicitor to manage the sale. Maintain regular communication to ensure a smooth process.
The exchange and completion process
- The buyer will undergo a similar approval process as you did when purchasing the property. Once approved, their solicitor will coordinate with yours to exchange contracts. A completion date will be set, marking when you will hand over the keys and settle any outstanding legal fees.
Is it difficult to sell shared ownership property?
Selling a shared ownership property is often more streamlined compared to traditional homeownership sales. The ease largely comes from the support provided by Housing Associations. These organisations play a role in simplifying the process, offering assistance in finding potential buyers.
Additionally, they often take on the responsibility of marketing your property, which can help speed up the process. This collaborative approach between the homeowner and the Housing Association can lead to a quicker and more efficient sale, making the experience less daunting.
However, if the housing association cannot find a buyer for the share ownership property within the specified nomination period, the owner is granted the freedom to market the property independently. This is unfortunately where some of the difficulty of selling can arise.
Saying this, the owner will usually have more control over the sale process, including setting the price, marketing strategies and arranging viewings. The issues that arise are due to the fact that the potential buyers must meet certain income thresholds and other criteria set by the housing association or local authority.
These thresholds or criteria could include:
- Income thresholds: Buyers usually need to have a household income below a certain level, for example, in the North East of England, the income threshold might be £80,000 or less.
- First time buyers: Priority is often given to first-time buyers or individuals who currently don’t own a property. Additionally, those in housing need, such as living in overcrowded or unsuitable housing conditions.
- Local connections: Some schemes require buyers to have a connection to the local area, such as living, working or having family there. This criteria helps support local communities and ensures that those who contribute to the area have housing opportunities.
- Mortgage eligibility: Buyers must demonstrate that they are eligible for a mortgage for the share of the property they intend to buy. This assessment ensures that buyers can sustainably afford the property.
- No outstanding credit issues: Potential buyers should not have significant outstanding debts or credit issues that could impact their ability to maintain mortgage payments.
- Sufficient deposit: While the deposit required for shared ownership can be lower than for buying a property outright, buyers still need to have enough savings for a deposit on their share of the home.
- Ability to sustain ownership: Prospective buyers are assessed for their ability to sustain homeownership, including meeting ongoing costs like mortgage payments, rent on the remaining share, maintenance and service charges.
What steps can you take if dissatisfied with a Housing Association’s handling of your property sale?
If you find yourself dissatisfied with the way your housing association is managing the sale of your shared ownership property, there are a number of steps you can take.
Firstly, begin by raising your concerns with the housing association directly. It’s often helpful to do this in writing, providing a clear and detailed account of your issues, which can lead to a direct resolution or clarification of the processes involved.
If the initial communication doesn’t resolve the issue, follow the housing association’s formal complaint procedure. This process is outlined in your lease agreement or is available upon request. Following the procedures means that your concerns ensure your complaint is logged and handled systematically.
Should the response from the housing association be unsatisfactory, or the issue remains unresolved, you can escalate the matter to the Housing Ombudsman. The Ombudsman offers a free, impartial service to resolve disputes between tenants and housing associations. They can investigate the issue and provide a resolution, which may include compensation or specific actions from the housing association.
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How much does it cost to sell Shared Ownership property?
The cost of selling a shared ownership property will most likely need you to budget to ensure a smooth transaction. While some costs will be fixed according to your lease agreement, there will be other costs that vary depending on competitive pricing.
Your property must be valued by a RICS surveyor, the cost for this service will vary but it’s a necessary expense to ensure an accurate market value. The average RICS valuation will cost you £320, but this can increase up to £800 if you require a Level 3 survey.
You will be responsible for your own solicitor’s fees, which on average will cost around 1% to 3% of your total selling price. It may also be important to note that the conveyancing process for shared ownership properties can be slightly longer than standard house selling.
Furthermore, if in your lease agreement it states that you need to cover your housing associations’ legal fees, then you will also be liable to pay for these.
You will also need to obtain your Leasehold Information Form, which will incur a £100 to £300 cost from your housing association. If your housing association assists in marketing your property, they will charge you for this as well – but this cost will depend on the terms of your lease.
If your current EPC is older than 10 years, you’ll need to obtain a new one, and these can cost between £60 and £120.
Should you choose to market your property via an estate agent, you will then also face estate agent fees from then which could be 1% to 3%+VAT of your house selling price. However, if you sell your property with us, you won’t incur any fees at all, ever.
We will cover all the fees associated with selling shared ownership house, including solicitor fees, estate agent fees and we will handle everything for you. Not only that, but we can also help you sell within 28 days, although most people decide to take slightly longer.
Can you transfer ownership of a shared ownership house?
It is possible to transfer ownership of a shared ownership property. This most commonly occurs during the sale of the property, as outlined in the steps above. However, there are some other circumstances where you might wish to transfer your lease or your share of the lease.
In such situations, you will need to seek permission from your housing association or local authority. Each organisation will have its own set of rules and procedures for transferring ownership and you will need to have a firm understanding of these before starting the transfer of ownership.
Once permission has been granted, you will need to appoint a solicitor to handle the legal aspects of the transfer. This could include drafting and signing new lease agreements, ensuring compliance with housing association regulations and possibly dealing with financial adjustments related to the ownership share.
Can you sell one Shared Ownership property and buy another?
You can sell your current shared ownership property and purchase another, provided you still meet the criteria for a government’s shared ownership scheme.
The scheme is designed to assist individuals who may not be able to afford a property on the open market, so your continued eligibility will depend on factors like income level and housing needs.
If you’ve increased your equity in your current property through a process known as staircasing (where you gradually buy a larger share of your home), you might find that you have built up enough financial leverage to transition out of shared ownership altogether.
This could open the door to buying a non-shared ownership home, giving you more options in the housing market.
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What is the bad side of selling shared ownership property?
Before you decide to sell shared ownership property, it is also important to understand the downside to selling.
If you own a smaller share of the property, your financial gain from any increase in its value is proportionally smaller. This means that the benefits of capital appreciation, a key advantage of property ownership, are significantly reduced. The smaller your share, the less you benefit from the property’s growth in market value over time.
Selling a shared ownership property can be far more complicated than selling a standard property. If you don’t own the property outright, you must first offer it back to the housing association, known as the right of first refusal.
This can increase the selling process timeline, as you have to wait for a fixed period to see if the housing association can find a buyer before you can market it yourself.
Even if you own 100% of the property, selling on the open market might come with its own challenges, especially if you don’t own the freehold as it will limit your pool of potential buyers.
And then when you do find a potential buyer, they will need to meet the specific criteria set by the housing association, which will limit your pool of buyers even further.
Finally, if you have increased your share through staircasing, the cost of these additional shares is based on the property’s value at the time of each purchase. As property values increase, so does the cost of acquiring additional shares which will impact the eventual selling price of the property.
What’s the catch with shared ownership?
Shared ownership schemes offer an accessible path to homeownership but as always, there’s a catch!
Shared ownership properties are leasehold, meaning you’re responsible for ground rent and service charges irrespective of the size of your share. These costs are ongoing and can add to your annual expenses.
The Leasehold Reform (Ground Rent) Act 2022 has brought changes for newly builds, abolishing ground rent. However, for existing leasehold properties, the ground rent factor may deter some buyers, and potentially affect the resale value.
Finding lenders that offer mortgages for shared ownership properties can be challenging, though more mortgage lenders are embracing this market. This limitation might affect your mortgage options, possibly influencing the terms and interest rates available to you.
Shared ownership properties often have restrictions on alterations or improvements. This limitation can impact your ability to personalise or enhance your home, possibly affecting its future value and your enjoyment of the property.
Staircasing, or increasing your share in the property, incurs additional costs each time it’s done. These include survey, legal, and mortgage fees, unlike a traditional property purchase where such costs are usually one time expenses.
Can you make a profit on shared ownership?
When selling a shared ownership property, there is potential for making profit. But the potential will hinge on the appreciation of the property’s value over time. If the market value of the home increases from the time you purchased your share to when you sell it, you stand to make a profit.
The extent of your profit is directly proportional to the size of the share you own in the property. For instance, if you own 50% of the property and its value has increased, you will profit from that 50% share of the increased value. Conversely, if you own a smaller share, such as 25%, your share of the profit will be correspondingly smaller.
Do shared ownerships go up in value?
The value of shared ownership properties is subject to the same market conditions as other properties. If the housing market in the area is strong and property values are rising, it’s likely that the value of shared ownership homes will also increase.
The location of the property plays a massive role in the increase of value it may be subject to. Properties in desirable locations like Liverpool, Newcastle, Leeds, Sheffield or Bristol with good transport links, schools and amenities are far more likely to see an appreciation in value.
Furthermore, shared ownership properties are leasehold and the length of the lease will impact the property’s value. Properties with longer leases are more valuable. If the lease is nearing its end, the property value might decrease unless steps are taken to extend the lease.
Looking to sell shared ownership property? We can help!
If you’re considering selling shared ownership property, The property Selling Company is here to guide you every step of the way. As a leading UK online estate agency, we specialise in streamlining the selling process for traditional and share ownership homes, because we believe selling a house should be fast, effortless and free.
Our team of experienced property professionals understand the unique aspects of selling shared ownership properties. We offer expert advice tailored to your situation and help ensure that you navigate through the process with ease.
From valuation to listing, and through to completion, we handle all aspects of the selling process. Our service is designed to take the stress out of selling, allowing you to focus on your next move.
We are able to leverage our vast network and our large online presence to ensure that your property reaches a wide audience of potential buyers that fit your housing associations criteria. Our targeted marketing campaigns are tailored to highlight the features of your property and attract the right buyers.
Arguably the most important benefit of using our service is our commitment to covering all fees associated with selling your shared ownership property. This includes valuation fees, legal fees, and estate agency fees to ensure a completely hassle-free selling experience not seen anywhere else on the market.
