Private purchase and cash

Long time reader - first time poster...
Quick run-down of the situation: I am in a position to purchase a house privately. The seller is keen to avoid putting it on the market and from what I can tell are happy with the offer I've put in.
Question: What would the implications be if I paid for part of the total sum in cash? Say for example that the owner accepts a bid of €200,000 for the house. Can I ask the bank for a mortgage of 180,000 and pay the owner the rest in cash? I should say that I have been given mortgage approval which covers the cost of the house. But I have a feeling that the owner might prefer to go down this route of accepting part of the payment in cash. I actually never thought of it myself until she suggested it. What would be the consequences (if any) legally if we went down this route? And how will we stand to benefit from it?

Thanks!

There would be no benefit for you in agreeing to this transaction. Difficult to see what benefit there could be for the seller of the property, given that a CGT liability is unliklely to occur. Most likley reason for this request is that the property is in negative equity & vendor is looking to pocket part of the sale proceeds.
It's unlikley to work, if you are requesting a mortgage. You will need to declare the cost of the property at 180K, & the Bank will not give you a 100% mortgage.
My advice is to avoid it. Insist on the transaction being completed above board.

Hi 44brendan,

Can you please explain 'CGT liability'? Just to clarify - I have the required deposits and have been given a mortgage approval for just over the total asking price. Obviously the house will be valued by the banks surveyor who will give the bank the results. But I assume houses sell for less their valued price all the time? So would the bank look twice on a 'deal' where the requested mortgage in this case would only be for €180,000 when the house has been valued at €200,000? Also - since the house is not a new house, I assume I would be liable to pay stamp duty? Would the stamp duty not come down if the mortgage comes down?

Stamp duty is on the price you pay. Officially. You would only be saving 1% of €20k

Your mortgage is the money you borrow from the bank not the price you pay for the house, they wont give you the whole amount youll have to put atleat 10% along with it through your solicitor as a deposit. If you give the seller €20 under the table you wont get a €180k mortgage youll get €180 less a 10% deposit. Its confusing when you keep saying a mortgage for €180k

Hi shigllgetcha,

Thanks for your comments. I'm sorry if I'm confusing you. I really don't mind either way, but if there's a substantial saving to be made then I'll think about it. You say I'll only save 1% of €20K? Would it not be 1% of €200,000? I know the bank won't give me 100% of the price. I have the 10% deposit and if the final price of the house was less than the €200,000 I could potentially pay more than the 10% and get a smaller mortgage - potentially saving me more money in the long run. Is this correct?

if you give the seller cash of €20k youll still be due to pay stamp duty on €180k. so it only really saves you €200 in stamp duty to give the seller cash.

I understand what you mean now, thanks!

sahd said:

If the price you pay for the house is 200k - you will be liable for 2k stamp duty regardless of how much you pay in cash or how much of a mortgage you get.

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they are talking about paying the seller under the table not with a €20k deposit. Dont agree with it its illegal, they could get found out and it only suits the buyer. But they would avoid some stamp duty. Its based on what you have paid through your solicitor and I doubt hed mention this to their solicitor or the solicitor would tell him not to do it

1. The bank will only give you max 90/92% of the price you are paying for the property. So if you declare that you are buying it for 180, they will base their percentage on this figure.

2. If you persist with this, you are entering into a contract tainted by illegality. Effectively if you have any problem with your contract at a later date it is not worth the paper it is written on. So any title guarantees, any warranties by the previous owner, any statements by them are worthless.

3. You will also be defrauding the Revenue, a dangerous and unwise step.

On the bright side you will save 200 euro.

The vendor could well have a heap of creditors chasing them. By the house been sold takes another bit of heat off him as they'll be told the property is sold.

As well as this how is the cash going to be handed over. In a solicitor's office ? The vendor won't tell his brief to go on until the cash is exchanged, and when the cash is handed over, how do you know the commitment will be honoured ??

This is very much a case of 'something that looks to good to be true, normally is'

Read Vanillas post. You know it makes sense.

If the vendor has a big mortgage with the bank, and is in financial trouble then the bank might do a deal with him to get some of their money back.

It might suit the vendor to say I have been offered x amount for the house. the bank might go for it.

Lets say, vendor mortgage 350000
He goes to his bank and says he has a offer of 180 on the house.
Bank might bite his hand off
buyer offers 180 and gives 20 to vendor.
Vendor gets to pocket 20 grand and has an interest in keeping the price down for the person buying the property.

The 20 grand could be for "furniture" and would be only paid after contracts signed.

In the right circumstances I can see it working.

The overall census seems to be that of not going down the route of a cash payment and to stay with the mortgage and keeping it all above board.