Interested buyer is selling - and we like their house which is for sale :)

PaulHUK

Hi all

So the title of this opening post is the situation...

We had a viewing of our home and they have made an offer, 10% under the advertised price.

The interested buyer is selling their property, which we have viewed and loved to bits. Of course there are a few things we would need to do in terms of maintenance etc.

But, has anyone been in this situation before? The house we like is advertised at 280k, which would attract a 3% stamp duty I think.

Ours on the other hand is up for 240k (and their first offer is 216k)

I'm thinking we should try and get them to agree a 250k price on their home which would be a 1% stamp duty.

The negotiation would then be about our home's price. Their house is definitely worth more, but do they actually lose out in any way by selling theirs for less and buying ours for less?

I think I am right in saying the tax man is the only loser, is that right? I'd like to know so I am confident about the situation before we get into the pricing discussion.

It's in England by the way, so not a Scottish process question!

I've bought and sold before, but never in this situation...

Help!

decsdad

10% off their house is £252, so I would be saying you accept 250 and we'll accept your 216. Seems fair to me.

PaulHUK

decsdad wrote: »

10% off their house is £252, so I would be saying you accept 250 and we'll accept your 216. Seems fair to me.

That's my thoughts too decsdad.

I cannot think of any reason they would not go allong with this way of doing the deal, can you?

The question in my mind is this:

Does a person lose out in any way because the house they buy is, on paper, bought cheaper?

The cost of insurance does not change based on house price afaik. Council tax is what it is regardless. I can't think of any reason for an issue. Can you?

It seems like a really good way to avoid the extra 2% stamp duty. Can anyone see any legal issues with doing it?

Blacksheep1979

Well whilst 10% off each seems fair on paper have they priced theirs for a quick sale? 10% off theirs is more than 10% off yours etc

PaulHUK

Thanks for the replies

Just had a thought:

If I buy the house of the person who wants to buy my house...

Say we agree prices and there is a 50k difference, could we then decide that the lowest priced house is to be sold for £1 and the other house for £50k (or 49,999)... the Stamp Duty for one person is nothing (on a £1 house purchase) and the other at a 50k purchase is also low (or nothing too)

Is that tax avoidance? Is there a rule that prevents this happening? Anyone got any idea about this? The two houses could be worth 200k and 250k but the buyer/seller decision is to sell at very low numbers which stops the tax burden. There must be something against doing this - or is there? Is it just that mostly it can never happen due to all th people in a chain?

:question:

GMS

PaulHUK wrote: »

Thanks for the replies

Just had a thought:

If I buy the house of the person who wants to buy my house...

Say we agree prices and there is a 50k difference, could we then decide that the lowest priced house is to be sold for £1 and the other house for £50k (or 49,999)... the Stamp Duty for one person is nothing (on a £1 house purchase) and the other at a 50k purchase is also low (or nothing too)

Is that tax avoidance? Is there a rule that prevents this happening? Anyone got any idea about this? The two houses could be worth 200k and 250k but the buyer/seller decision is to sell at very low numbers which stops the tax burden. There must be something against doing this - or is there? Is it just that mostly it can never happen due to all th people in a chain?

:question:

Are there mortgages involved? If do you need to make sure you do not lower the purchase price so they become difficult to obtain mortgages on.
A mortgage company will base lending on the lower of the valuation or purchase price. Make sure the purchase price is enough for the required mortgage to be arranged.

PaulHUK

GMS - Thanks - that's a good point about the mortgage situation, I'll have to look into that.

I see another thread now, about the issue of stamp duty land tax avoidance. However it also seems lacking on any definitive facts about the issue.

Cheers GMS

silvercar

Your solicitors complete the land reg forms on your behalf and declaring the stamp duty due. So while it looks reasonable to sell both on the cheap side (and 10% discount in this market would not raise eyebrows), going for broke at £1 and £50,001 would clearly be seen as dodgy.

sonastin

AFAIK stamp duty is based on "market value". If you bought a house, the price you are willing to pay is the best indicator HMRC have of its market value. But in this situation paying £1 and £50,000 is clearly not "market value" so (I think) they might make their own assessment of the market value of each property for SDLT purposes. The trick is to find the balance between realistic prices and SDLT thresholds. Agreeing prices so close to the threshold as you are proposing could trigger an investigation by HMRC but as 10% under the asking prices in this market is not unreasonable, my feeling is you would be OK.

fathippy

Whilst the replies are no doubt correct regarding absurd prices, what is the scenario where a property is transferred for no value or gifted ? Clearly there would need to be no mortgage in place, and the two properties would need to be of similar value to avoid balancing payments, but if two simultaneous gifts were made, there would be nothing untoward in writing NIL value on the stamp tax returns ?