The FSA has released a statement advising consumers about quick property sales, detailing the dangers of fraud involved with such types of real estate transaction.
The advice, titled ‘Beware of fraud in quick property sales’, particularly targets those who face repossession or are in mortgage arrears.
It highlights several steps that consumers can take to avoid being prosecuted or losing housing benefits.
The FSA define quick property sales as those that offer a discounted price for a property in return for an expedited sale, usually knocking about 20 per cent, but at times approaching 35 per cent, from the market value of the property.
It notes that the deals are also known as “below market value, BMV deals or distressed property sales”.
The FSA explains that it is aware of cases where a buyer will ask a seller to state that a property is being sold for the full market value rather than the discounted price agreed upon, usually to allow the buyer to borrow more money from a lender or obtain a better deal on their loan.
Misleading a lender in this way, the FSA goes on to say, is fraudulent and both a buyer and seller could face prosecution.
The regulator offers the following advice for consumers looking to protect themselves:
“If a buyer asks you to exaggerate the price they will pay you for a property to ensure a quick sale, you should keep in mind that this is fraud and you could put the sale at risk and even face prosecution.
“If you are receiving benefits, you should also consider that overstating the price paid for your property could affect your benefits payments as it may be assumed that you have additional money from the sale of the property.
“While a quick sale may be appropriate for some people there are other steps you can take to deal with problems paying your mortgage that might leave you better off, such as discussing your options with your lender.”
A warning was also issued regarding the caution needed over other home financing schemes.
The FSA said: “In some cases, you may be offered the option to remain in your property and rent it from the investor who purchased it. If so, this is a sale and rent back agreement and firms offering this must be authorised by us. If they are not shown on our Register with sale and rent back permissions, don't deal with them.
“In addition, firms may offer you other solutions which appear to repay your debts and may allow you to remain in your home without selling it immediately. We urge you to treat all schemes like this with caution and see the consumer alert we issued last year on Lease Options and Exchange with Delayed Completion schemes.”
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