Key Benefits: Avoiding Chains | Price Flexibility | Attracting Buyers

Most homeowners want the best price they can obtain for their home but this also maximises the amount of Stamp Duty their buyer will have to pay. Setting an unrealistic asking price and being reluctant to modify it is unfortunately all too common. Swapping homes in certain circumstances can allow you to achieve your full asking price without actually doing so. You may think this is contradictory and impossible. Doing this requires a slightly different approach which we call "Getting Realistic". It is a suggested approach to reducing Stamp Duty Land Tax. It is best understood using the real life example shown below of a swap of two homes. It is usually much more difficult to achieve such a result if a chain of properties is involved.

A swap was agreed of Property A with the much larger Property B. There was a small mortgage on Property A and none on Property B. During discussions it was agreed that the difference in asking prices between the two properties of £260,000 was about right but that both their asking prices were unrealistic ie. above "Market Value". Had they gone ahead at the unrealistic prices the outcome is shown below. Mrs B was the owner of Property B and Couple A owned Property A.

Unrealistic Prices

The Estate Agents involved were able to produce evidence of the "market value" of similar properties in the same area which had changed ownership recently. During negotiations it was agreed the asking price of both homes could be reduced by approximately £30,000 to the Market Values shown below.

Realistic Market Value Agreement - "Getting Realistic"

*Stamp Duty Land Tax which is a % of Market Value

Final Outcome

Mrs B was delighted to own property A which was more manageable than her old home. She took some convincing that she had in effect achieved more than the full asking price for her old home. Had the swap gone ahead at the "unrealistic prices" £251,901 would have been deposited in her bank account. An additional £699 was actually deposited in her account making a total of £252,600.

Couple A were extremely pleased to own property B. Swapping enabled them to reduce the cost of buying their new home by £41,298 (£34,950 value reduction +£6,348 Stamp Duty reduction).

The Stamp Duty Office raised no objection to the "Market Value Agreement". They could have consulted the local Valuation Office for their opinion on the "market values" reported to them. The Valuation Office could have suggested the values were too low but Couple A and Mrs B had evidence of similar recent values for similar properties in the same area. They also had data to show that on average the "market values" being reported at the time were 5% below the last advertised asking price of the properties being sold. The "market value" of property A was 11% below its last advertised asking price and property B was 6.6% below.

The Estate Agents involved were happy to have achieved two speedy and straightforward sales. Couple A were happy to pay an additional fee to their Estate Agent for negotiating the reduction in the cost of their new home.

The Solicitors involved had no concerns about the "market values" agreed and reported the figures to the Inland Revenue. The evidence available to justify the values was not required. You should always seek professional advice when contemplating similar agreements or "Getting Realistic".