What Is An Assisted House Sale? (Assisted Sale Cash Advance)

If you are wondering “how can I get my house sold quickly?” an assisted sale might be your answer. If you’ve had your house on the market for a long time, an assisted house sale might be the solution.

Assisted house sales can help you to sell your house fast for market value

An assisted sale of your house is where an investor (or Assisted Sale Company) helps you to sell your house quickly.

An assisted house sale is if you sell your house to an Assisted Sale Company for a guaranteed price. You receive an immediate cash payment of the equity in your house or a share of the profit from the ultimate onward sale. Until the onward sale they take over the mortgage on your home with permission from your lender.

An assisted sale requires a legal contract, which is prepared by a UK solicitor.

How do assisted house sales work?

There are a few options when it comes to selling your house using an assisted sale, which are as follows:

1. An assisted sale using a lease option.
2. Assisted sale advance cash.
3. Assisted sale no advance cash, except for £1.

You may now be wondering what the advantages or benefits are of each of these options vs the disadvantages. Plus why go for one type of assisted sale over another?

Let’s take a look at this in more detail.

1. Assisted sale using a lease option

Not everyone would agree with me that a property lease option is a form of assisted house sale. The concept of a lease option is relatively new to the UK, but option contracts themselves have been around since the dawn of the property market. Put simply, a lease option is also known as a lease with the option to purchase.

A lease option is created using a legal contract between you as the ‘seller‘ of the property and the investor or ‘the assisted sale company‘ as the ‘buyer‘ of the property. This legal document, which is prepared by a UK solicitor, states that the investor has the right to buy your property at an agreed price between now and some point in the future, at an agreed future price. This future price is what’s also known as the ‘strike price‘.

A key part of the lease option is the ‘option fee‘ or upfront cash or advance. The amount of cash advance will among other things depend on how much equity you have in your property. The minimum option fee for a lease option is £1.

What are the benefits of an assisted sale of your house using a lease option?

There are a few key benefits to selling your home using a lease option, which include the following:

1. Speed of sale.
2. Mortgage payments are taken over by the investor.
3. Property repairs are taken over.
4. Council tax and utility bills are taken over.
5. Insurance costs.
6. Premium above current market value.

Now let’s take a look at each one of the benefits in detail.

1. Speed of sale

A lease option is very fast to prepared and execute, which means to get to sell your home very fast. This is of particular benefit if you’re going through the repossession process and if you’re in arrears on your mortgage.

A lease option offers probably the best solution to getting out of mortgage arrears and repossession very quickly. But having said that, a lease option is also an extremely good solution if you just need to sell your house quickly.

For example, if you live in either London or Blackpool, the average time to sell your home in these two places is currently the slowest in the UK.

More Reading: Home repossession process in The UK (When is it too late to stop it?)

2. Mortgage payments are taken over by the investor

One of the main aspects of a lease option assisted house sale is that your mortgage payments are taken over by the investor.

3. Property repairs are taken over

The repair and upkeep of your property is taken over by the investor, so you no longer have to worry about these costs. This is particularly of benefit if your home is in need of repair, but where you’ve not go the funds to do the work.

More Reading: How do you sell a house that requires major repairs UK?

4. Council tax and utility bills are taken over

You are no longer responsible for the utility bills and council tax, this is taken over by the investor.

5. Insurance costs

The cost of insurance your property also falls to the investor as a cost. In many cases, and as the property will still be in your name, the insurance will need to be taken out by you, this cost will be taken over by the investor.

6. Premium above current market value

One of the main attractions of a lease option purchase is the fact that the option agreement can include to buy the property at a price that’s higher than it is currently worth. This is perfect for sellers in the difficult negative equity situation.

Disadvantages of using a lease option as an assisted sale

There are usually always disadvantages where the are advantages, but so long as the advantages outweigh the disadvantages, then this is usually the right solution.

Let’s take a look at the disadvantages of a lease option solution to sell your house quickly.

1. You are still ultimately responsible for the mortgage.
2. Extra stamp duty cost.
3. Mortgage lender agreement.
4. Solicitors don’t understand lease options.

Now let’s take a look at the disadvantages in more detail.

1. You are still ultimately responsible for the mortgage

I have listed this a disadvantage, but for me it’s only a potential disadvantage. The reason I say this is because it depends on which investor you are dealing with. If you deal with a reputable investor, this should never become a problem for you.

It would therefore not actually be a disadvantage.

2. Extra stamp duty cost

The Conservative government introduced an extra 3% stamp duty for those who buy more than one property. If you are buying another property and haven’t already sold the last one, you will pay an additional 3% stamp duty on the new purchase.

This means for example, on a house that would cost you £250,000 to buy, that’s an additional £7,500 of stamp duty to pay.

But there’s no need to worry about this, as the extra stamp duty charge can be incorporated into the option fee or upfront cash you receive at the start of the agreement.

More Reading: What are the tax implications of buying a house before selling

3. Mortgage lender agreement

For some assisted sales it’s necessary to get agreement from your lender before the assisted sale agreement can be put in place.

Having described this as a disadvantage, it usually isn’t, as most mortgage lenders agree to this arrangement, so long as they know the mortgage payments will be made each month.

4. Solicitors don’t understand lease options

There are many solicitors and other professionals who don’t understand lease options and use their lack of knowledge and understanding to harangue what is essential a great way to help you if you’re finding it difficult to sell your home for whatever the reason.

It may be your house needs modernising or freshening up in order for it to sell and achieve a good market price. But it might be you don’t have the money to do the necessary repairs. It may be that you are not able to afford the mortgage payments. Or worse still you may have gone into arrears and facing a potential repossession.

More Reading: How Many Months Mortgage Arrears Before Repossession in the UK

We see lease options as a way of helping you. We look for the best way to achieve this. If you are struggling to afford your mortgage or you can’t afford the repairs, we look for a way to structure a deal that works for you as well as us. Solicitors do need to be a part of the transaction and you as well as us have to be separately represented.

But it’s best to have a solicitor that understands lease options represent you. We can recommend solicitors that do understand lease options and don’t denigrate them unnecessarily.

More Reading: Selling my house on a lease option (Are lease options a good idea?)

2. Assisted sale advance cash

An assisted sale with advance cash is very similar to the above lease option. But there’s one main difference, which is the time scale of when the final transaction takes place. The main contract that lies behind an assisted sale is an option contract.

With a lease option the final transaction is the strike price when the investor takes over the property and pays down the mortgage at an agreed time in the future.

But with an assisted sale with a cash advance (which includes the option fee) the transaction happens a lot quicker. The investor takes over the responsibility for selling your house for you. Like a lease option, you’ll receive an amount of advance cash.

This advance cash is usually based upon an agreed valuation of your property, less the mortgage balance outstanding. However, unlike a lease option, you will not be getting an offer in excess of what your house is worth, but it will be less.

During the time between when you receive the cash advance and the investor sells your house, the investor will take over the responsibility of your mortgage payments. When the investor sells your house, the proceeds will be used to repay your mortgage and the sale will be completed.

If you have a house that perhaps has a damp problem, or a rat infestation or another significant problem you don’t want to deal with yourself, an assisted sale advance cash solution might be the way to go for you.

What are the benefits of an assisted sale cash advance?

Without going into detail on some of the benefits, which are very similar to the lease option solution, these are as follows:

1. Speed of sale – you get the majority of your equity fast.
2. Mortgage payments are taken over by the investor.
3. Property repairs or other problems causing your home to not sell are taken over.
4. Council tax and utility bills are taken over.
5. Insurance costs are covered.
6. Mortgage is paid off quickly, usually within 6-8 weeks from the start of the contracts.

What are the disadvantages of an assisted sale cash advance?

1. You are still ultimately responsible for the mortgage.
2. Extra stamp duty cost (but see below).
3. Mortgage lender agreement.
4. Solicitors don’t understand assisted sales.

With respect of the above disadvantages, they aren’t really a problem. See below for the extra 3% Stamp Duty, but so long as you choose a reputable company to complete the transaction with, disadvantages 1, 2 and 4 above will not be a disadvantage.

With regards to the extra stamp duty on an assisted sale with a cash advance, you’ll be able to recoup the Stamp Duty. The additional 3% Stamp Duty is reclaimable if your old house is sold within two years of buying your new home. This is a simple matter of completing a form to reclaim the Stamp Duty.

3. Assisted sale no cash advance

Whilst I called this an assisted sale with no cash advance, this is strictly not the case. As already mentioned, and like a lease option, the main contract behind an assisted sale is an option contract. This means that a minimum option fee is payable of £1 to make the contract legally binding.

Just like lease options, this type of assisted sale is one that we like at Bowfin. But it does require you to be able to move out from your home and it’s usually better if you’ve paid off your mortgage beforehand.

But if you’ve not repaid your mortgage, it doesn’t prevent this type of assisted sale from being used.

Or alternatively, this type of assisted sale works really well if you’ve already moved out. There are many people who haven’t been able to sell their home, partly because of the Brexit effect, so have moved out in any event.

Insurance companies don’t like empty homes

Leaving your home empty and on the market is one thing, but insurance companies don;t like empty homes. An empty home is vulnerable to vandalism and squatters moving in.

The best assisted sale of this type is where you have a home that can be updated or modified in a way to get the best value from it. If by extending the property or converting the loft, or by just simply updating the essentials like the kitchens, bathrooms and decorating your house it will increase its value.

Not everyone is inclined to do building works to their property. Also, not everyone has the necessary finances to achieve the best outcome to achieve the best sale price they can. This is why this type of assisted sale works so well, especially if you’re struggling to sell your house.

This type of assisted sale works very well with probate homes. If your parents have left you their home after they’ve passed away, more often the house is in need of modernisation. Because of the modernisation required, this will reduce the market value of the house. That means you’ll not achieve as much for your parents old home as you can.

The most likely purchaser of a probate house is a builder or developer. Both builders and developers need to make a profit in the deal and so will offer at under market value to achieve this. They also have to take account of the additional 3% Stamp Duty they have to pay.

That’s why an assisted sale works so well, as there’s no Stamp Duty to be paid.

Assisted sale no Stamp Duty to factor in the sale

An assisted sale of this type works by the vendor putting up the property and the investor carries out the repairs, updating and modernisation or extension work. The investor in this case draws up a document to take ‘control’ of your property, but the property doesn’t officially change ownership at this point.

This is why there’s no stamp duty to be paid at this stage in the process. Whilst conventional builders or developers will deduct this additional 3% Stamp Duty from what they pay you, we don’t.

However, just to be clear, there will be stamp duty added to the ultimate sale. But this will be paid for by the new buyer.

Share of the profits in the uplifted value

The other benefit of ‘partnering’ with an investor on the basis of an assisted sale is so you can share in the profits in the ultimate sale of your house.

The share of profits you get is up for negotiation, but is usually between 10-20% of the uplift, depending on the work and value uplift involved.

The ‘profit’ or uplift in value is the difference between your property’s current market value and the sale price, less the cost of refurbishment and the buying and selling costs.

Better to do an assisted sale without instructing an estate agent

It’s better to approach someone like Bowfin before you instruct an estate agent if possible. But it’s not the end of the world if you are already selling using an agent, as we are happy to work with your agent.

But I will warn you, not all agents like this arrangement and most will try to put you off going down this route. The reason they don’t like it is firstly they don’t understand the deal. It’s human nature to denigrate something they don’t understand.

The second reason they don’t like it is because they fear losing their commission. However, this wouldn’t happen with a reputable investor. Reputable investors agree with your agent to for the ultimate sale of your house. The agent will then actually win, as they get their commission on the uplifted value.

This type of assisted sale is a win win all around.

The disadvantages of an assisted sale no cash advance

There are a few potential disadvantages of using this type of assisted sale, but I feel the advantages far outweigh these, (see below).

1. You need to wait for the cash. There will be a slight delay in getting your sale proceeds of sale. This is because you need to wait for the repairs, modernisation or extension work to be completed. But this is outweighed by the fact that you get a sale done quickly in the first place and you’ll usually receive more cash too.
2. Extra 3% Stamp Duty. You may have to pay the extra 3% Stamp Duty if you are buying another place. However, it’s likely you’ll get this back as most deals finally sell and complete well within the two year time limit to get a refund of this tax. But if you’re selling a probate house this is not applicable in any event.

The benefits or advantages of an assisted sale without a cash advance

1. Quick sale. Each month that ticks by whilst you wait for a conventional sale, you’ll be incurring costs. These will at the very least be the utilities.
2. More cash for your property. As you’ll be sharing in the profit on the ultimate sale and you won’t be losing out to the extra stamp duty that conventional builders take off their offer price, you get more money in your pocket.
3. Utilities, insurance and council tax are taken over by the investor.
4. Major repairs needed to sell your house, be it probate or not, are done at the cost of the investor.
5. Your house is no longer empty. If you’ve already moved out or the house is a probate sale, your house will be empty. This isn’t good, as it could attract unwanted attention from squatters, vandals and insurance companies don’t like empty properties.

I hope this article has helped on ‘what is an assisted sale’

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