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Buying my parents house UNDER market value.

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24

Comments

  • btloptingout
    btloptingout Posts: 141 Forumite
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    The following deal might work:

    - Sell house to three siblings at £83K each (3 * 83 = £250K)
    - Each sibling has an IO motgage of £415 pcm
    - Parents have pot of £250K that can just about cover your 3 mortgages.
    - Erosion of capital will be at a rate that will not be exhausted in their lifetime, you will still have some left as an inheritence for the 3 of you.
  • Riq
    Riq Posts: 10,430 Forumite
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    56cheffy wrote: »
    They will continue to live there and pay a 'reasonable' amount of rent.
    You are paying them £100k less than the house is worth AND they are going to pay reasonable rent??!!!

    Can I get in on this deal?! :p
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    For confirmation: No, I'm not a 40 year old woman, I'm a 26 year old bloke!
  • SquatNow
    SquatNow Posts: 2,285 Forumite
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    A few points of note:

    The OP is proposing to buy the house AT THE PEAK OF A PROPERTY BUBBLE.

    A 30% drop in prices (the amount now being predicted by some of the big estate agents!) would leave the OP in negative equity.

    The £350k market value is just a number. the only way to find the true market value would be to sell the place. If put on the arketnow itmight only sell for £250k, in which case the OP is paying full market value.

    Even if the price it really would sell for was £250k, if the place i valuedat £350k and the parents die within 7 years, HMRC would want IHT on the 100k "difference" that never eally existed.

    In a best case scenario, if prices didn't drop, when the OPs parents die his siblings ould probably sue him for the "missg" 100k.

    I can't see how this can turn out well.

    Best just to get his parents to sell the house and rent a smaller place.
    Bankruptcy isn't the worst that can happen to you. The worst that can happen is your forced to live the rest of your life in abject poverty trying to repay the debts.
  • DrFluffy
    DrFluffy Posts: 2,549 Forumite
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    Both parties (you and your 'rants) need to get separate independent legal advice, and a licence drawn up giving them permission to remain until an agreed point (usually their death or decision to move to a nursing home).
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  • Ems!
    Ems! Posts: 855 Forumite
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    There are IHT implications with what you are suggesting ( look up " gift with reservation " rules). These can me mitigated if patents pay you open market value. The kind of thing you are suggested is not uncommon with wealthy families - the children get the house, and the value of it is removed from parent's eventual estate providing that they are paying rent at fair market value. This gets further amounts of money into your hands without HMRC having a slice. Sounds like it might not be entirely appropriate of your parents are short of cash though - some of the above ideas are good. Defo get legal advice from someone who knows abt IHT rules.
  • Generali
    Generali Posts: 36,411 Forumite
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    It sounds like a reasonable deal all ways around. Your parents get the cash that they want and get to stay in their home (without having to go to one of those shyster companies). You get to buy the house at a better price.

    Stamp duty will be payable on the market value of the property (link to HMRC) not what you pay so paying just below the threshold won't necessarily help. Of course you can always argue the toss with them that the house is really worth £249,999.99 not £350k - eventually the courts can decide if you want them to.
    Where the consideration for a land transaction is satisfied by the transfer of an asset, the market value of that asset will be the price which that asset might reasonably be expected to fetch on a sale in the open market.

    As above there's the IHT thing too.
  • bluejake
    bluejake Posts: 268 Forumite
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    56cheffy wrote: »
    My parents need the cash, don't want to move, the house is valued at £350000, the most I can afford is £250000.....

    What are the comebacks on this if I buy at a greatly reduced price?

    Your parents are short of cash. So you want to rip off £100k from them and then charge them rent as well! :cool: You sound like a wonderful son...I think your parents should get some advice independent of you e.g a solicitor or the C.A.B.

    What happens to your parents if you cannot meet the mortgage payments or get divorced etc etc. As far as I can see your parents lose an enormous sum of money and their security whilst you are quids in.:cool:
  • btloptingout
    btloptingout Posts: 141 Forumite
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    bluejake wrote: »
    Your parents are short of cash. So you want to rip off £100k from them and then charge them rent as well! :cool: You sound like a wonderful son...I think your parents should get some advice independent of you e.g a solicitor or the C.A.B.

    What happens to your parents if you cannot meet the mortgage payments or get divorced etc etc. As far as I can see your parents lose an enormous sum of money and their security whilst you are quids in.:cool:

    want to rip off £100k....an enormous sum of money and their security whilst you are quids in

    Is this a wind-up?
    He's their son!!!....They have probably suggested this deal.

    If they went to a company offering a similar service they would be worse off and have zero security.
  • dolce_vita
    dolce_vita Posts: 1,031 Forumite
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    Regardless of the ins and outs of whether this is a good or bad deal, it really is a terrible state of affairs that people even need to think about something like this just to provide a bit of financial security for themselves or their parents.
    dolce vita's stock reply templates

    #1. The people that run these "sell your house and rent back" companies are generally lying thieves and are best avoided

    #2. This time next year house prices in general will be lower than they are now

    #3. Cheap houses are a good thing not a bad thing
  • Ems!
    Ems! Posts: 855 Forumite
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    bluejake wrote: »
    Your parents are short of cash. So you want to rip off £100k from them and then charge them rent as well! :cool: You sound like a wonderful son...I think your parents should get some advice independent of you e.g a solicitor or the C.A.B.

    What happens to your parents if you cannot meet the mortgage payments or get divorced etc etc. As far as I can see your parents lose an enormous sum of money and their security whilst you are quids in.:cool:


    Are you joking?!!! The parents won't be making the mortgage payments... the op will as he will own the house. They will pay him rent. They are FAMILY!!! I am sure they will not go into it lightly and of course there needs to be trust but I would trust any of my family with something like this.... the op is not ripping their parents off!!!
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