What Is a Concessionary Purchase? A simple Guide

Someone has offered to sell you a property for less than it’s worth, and you’re not entirely sure what to make of it.

Perhaps it’s your landlord, who has decided to stop renting and would rather sell to the person already living there than deal with an empty property and an estate agent. Perhaps it’s a parent or a grandparent who wants to help and has landed on this as the way to do it.

Then the phrase turns up: concessionary purchase. Usually from a solicitor, or a lender, or a search at eleven at night, and because it sounds fairly official, it’s easy to assume there must be a catch buried in it somewhere.

There isn’t much of one, though it does come with a few more checks than a standard purchase. It’s a long-standing way of buying a home, it comes up more often than people expect, and it’s worth understanding before you decide it couldn’t apply to you.

How a Concessionary Purchase Works

A concessionary purchase is one where you buy a property for less than its market value, and the seller knowingly agrees to that lower price. The gap between the two figures is called the concession, though you’ll also hear it described as gifted equity.

What matters is what happens to that gap. If the lender’s valuation supports the higher figure, that difference is equity in the property from the day you complete. Whether they’ll then count it as your deposit is a separate question, and it depends on the individual lender and how the sale is set up.

It’s worth separating this from simply negotiating well, or from buying somewhere cheap because it needed a new roof. The reduction has to be deliberate. The seller knows what the property is worth and is choosing to sell it to you for less, normally because they want you in particular to have it.

Who Usually Sells a Property This Way?

Two situations account for most of what comes across our desks.

The first is a landlord selling to a sitting tenant. Rather than serving notice, emptying the property and putting it on the open market, they offer it to the people already living there, often at a reduced price. It can mean far less disruption for the tenant and may save the landlord from an empty property or an open-market sale, though how much of that holds true depends on how the transaction is structured. We’ve had noticeably more of these conversations over the past year or so, as more landlords weigh up whether to stay in the market at all.

The second is a family sale. A parent, grandparent or relative sells below value to someone in the family, sometimes because a home is being passed down, sometimes just because that’s how they’ve decided to help.

Worth flagging early in either case: the buyer and seller will each need their own solicitor, and if the seller plans to carry on living in the property, say so at the outset rather than halfway through – it can change what’s possible.

The mortgage side works along broadly similar lines either way, though the paperwork and the wider considerations can look quite different depending on which situation you’re in.

How the Discount Can Work as a Deposit

This tends to be the part people most want explained, and it’s usually the part that surprises them.

Some lenders will assess a concessionary purchase against the property’s open market value rather than the reduced price alone. Where they do, the concession can be treated as gifted equity and count towards some or all of the deposit.

Which is how some buyers end up purchasing without the cash deposit they’d assumed was non-negotiable, or with a good deal less of one.

It doesn’t work that way everywhere, though. Some lenders cap borrowing against the discounted price rather than the valuation; others want a contribution from the buyer regardless, and some won’t look at these purchases at all. But if you’ve quietly parked the whole idea because there’s nothing much in your savings account, this is the bit worth looking into before you write it off.

What Lenders Usually Want to See

Criteria vary, but a few things come up fairly consistently.

There’ll be a valuation, so the lender can establish the property’s true value rather than taking the agreed price at face value. There’ll be written confirmation that the discount is a gift, with nothing expected back and no continuing financial interest in the property for the seller. And then the ordinary business of any mortgage application: income, affordability, credit history, whatever you’re already committed to each month.

There’s usually more to document than on a standard purchase, simply because more needs to be evidenced. Knowing roughly what might be asked for tends to make it feel far more manageable when it lands.

Why These Cases Often Benefit From Advice

The honest position is this: not every lender will consider a concessionary purchase, and the ones that do don’t handle them the same way.

Some are comfortable with the concession covering the deposit outright, while others expect the buyer to put something in. They take different views on how the seller’s position is treated, what evidence they’ll accept, and whether the seller can carry on living in the property afterwards, which matters a great deal in some family arrangements.

Approach one lender directly and you get one set of criteria and one answer. If that answer happens to be no, it’s very easy to conclude the whole idea doesn’t work, when in fact you may just have asked in the wrong place.

Knowing which of the lenders available to us tend to be comfortable with these arrangements, before anything is submitted anywhere, is a fair chunk of what we do. In cases like this, checking first can avoid delays, repeated document requests, or an application going to a lender whose policy was never going to fit the arrangement.

What This Doesn’t Change

A concessionary purchase changes the deposit picture, but it leaves most of the rest alone.

Affordability is still assessed as normal. So are your income, your outgoings and your credit history. If the borrowing wouldn’t be sustainable month to month, a lower purchase price doesn’t rescue that.

There can also be tax implications for the seller, which vary depending on circumstances and where the property is in the UK, so that’s one for their solicitor to pick up early.

People do sometimes assume a below-market price clears every hurdle at once, which is an easy enough assumption to make. Having the conversation early usually clarifies what it solves and what it doesn’t, which is more useful than finding out later.

Where to Start if This Might Apply to You

If somebody has raised the possibility of selling you a property below its market value, or you think they might be about to, it’s worth getting a sense of where you stand before you commit to anything either way.

A lot of people rule themselves out before they’ve asked anyone. That’s the part we’d gently push back on because knowing your position is a far better place to start from than guessing at it.

We’re always happy to talk it through.