Private landlords are urged to steer clear of fraudsters touting below-market-value property deals.
The Financial Services Authority claims many BMV and ‘no money down’ deals only work because they are scams in new advice to home buyers.
The warning is part of an ongoing FSA assault on the seedier side of the property market, and follows on from outlawing sale-and-rent back deals last year.
The regulator also takes a dim view of lease option and other ‘creative’ property transactions that involve buying and renting back homes to owners who face repossession by a mortgage lender or bankruptcy.
The FSA explains that BMV buyers are picking up homes at 20% to 30% below market value by offering quick cash sales.
They then urge the sellers to inflate the sale price on completion paperwork so anyone arranging a mortgage can ask lenders for 100% deals by falsely reporting the value.
These deals are then ‘packaged’ for unwary property investors who often arrange a buy to let mortgage on the fraudulent figures.
Inflating the house price to obtain a mortgage by deception is fraud – and can end up with anyone signing the mortgage papers going to court and facing a hefty fine or even jail.
“The value of a mortgage obtained through fraud is a crime,” said a spokesman. “Fraud can occur through providing false details, failing to provide information required by law or even where you know only that the information used by others, such as the price of a house sale, might be misleading or untrue.”
The FSA also warns landlords that sale and rent back deals are also likely to be scams.
“Sellers are sometimes offered the option to stay in their home 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, don’t deal with them,” said the FSA.
“Firms may offer other solutions which appear to repay debts and may allow you to remain in your home without selling it immediately. Treat all schemes like this with caution.”
