Ethical house buying dilemma

jibbyboo

My godmother has decided to sell her home to move into a retirement village. It has all happened very quickly, and in order to help, I have suggested that I purchase her house.

I am a FTB, and this house is currently 40% more than I was intending to spend. I would have to get assistance with a downpayment from family.

Before I mentioned that I may look at purchasing the house, she mentioned that an estate agent had quoted her around £10,000 less than her son has offered it to me for - he's suggesting I pay their *ideal* price.

By not going through an estate agent, we will both be making a saving, plus they won't have to wait for a potential chain. I don't want to cause friction as this is a rather delicate situation being that we know the people involved. So if anybody has been in a similar scenario I'd be interested to hear your thoughts.

Thanks!

oldtrout

Sorry I'm not an expert on all this, but my first thoughts were:
1. Do you really want this house for yourself? Or are you doing it as a favour, to help out? If it's already more expensive than you were intending to spend, you'll may be stretching yourself financially.
2. If her son has offered it to you for their 'ideal' price, that might be way overvalued and you may not get a full mortgage for it anyway.
3. If you already know that the estate agent's valuation is lower, then I think he's trying it on.... Usually there is a price reduction for a quick sale!
4. He'll make a saving on the sale by not going through an estate agent, but you won't make a saving (someone will correct me if I'm wrong!).
5. You'll end up in negative equity.
If you think it would cause any friction whatsoever, then think long and hard about proceeding.

Yorkie1

Good points by oldtrout.

The most salient for you, financially, is that if you need a mortgage then the lender will instruct a valuation, which will spot whether the agreed sale price is correct or inflated.

If the valuer takes the view that it is inflated, then it is likely that the lender will reduce the amount that it will lend you, particularly if you are close to a change in loan to value % / products.

Have you done a search on nethouseprices.com or zoopla to check for recent sold prices of similar properties in the neighbourhood?

That has to be your starting point.

jibbyboo

Thank you both, those are really helpful points.

I do love the house actually, so that helps. I have also looked at other houses in the area which are within £10,000 above and £20,000 below his asking price.

The son has now come back to me with an offer of a trust where he will purchase and own 1/3 of the property, won't charge me rent on it, and I can purchase it back from him as and when I am able to - this is to enable his mother to move out, so for her benefit as opposed to mine which is entirely understandable.

I suppose the next step is to get the valuation from the mortgage company, and try to ensure that any trust that is created is mutually beneficial.

It's unfortunate that I know so little about this and it needs to be done so quickly. Again, any thoughts appreciated.

dimbo61

You can not sell 2/3 of a property!!!!
What happens if you fall out with the son or he wants his 1/3 six months after you move in.
If you do not have 10/15% deposit and the ability to get a mortgage for the rest then you can not afford to buy the place.
If the property has had little money spent on it in the last few years you will also need funds to pay for repairs/updating

armour

The house needs to be properly valued. Why not have the son get 3 different estate agents round to give official valuations and then take the average as the selling price. If that's more than you can afford then it will have to be sold on the open market.

Annisele

I can't see mortgage lenders being happy with the son's trust plan.

To put it bluntly, lenders want to ensure they can repossess the property if you don't pay. If somebody not named on the mortgage has an interest in the property, that makes repossession more difficult - chucking you out because you haven't paid is all well and fair, but chucking somebody else out might not be.

The problem may not be insurmountable - you're essentially talking about DIY shared equity - but I think it will nevertheless be a problem. At best it'll restrict the number of lenders interested in lending to you; at worst it'll restrict that number to zero.

getmore4less

Walk away it will end in tears.

The son is clearly trying it on and so whatever hapens now one of you will feel hard done by if you go through with this.

Why is the son involved.

get them to put it on the market properly.


Whats the price.
whats you income.
Whats your deposit.

egoode

I agree with armour and it's what I was going to suggest, agree with the son to get 3 estate agents valuations or even pay a surveyor to provide an independent valuation. Once you have done that agree to take the average of the valuations. Also I wouldn't go into a trust with the son as that is likely to prove to be more trouble than it's worth.

Don't get bullied by the son or let him 'guilt' you into something you can't afford, this is a business transaction and it will be you that will affected most if you overpay or if they try to cut corners.

brizza

egoode wrote: »

I agree with armour and it's what I was going to suggest, agree with the son to get 3 estate agents valuations or even pay a surveyor to provide an independent valuation. Once you have done that agree to take the average of the valuations. Also I wouldn't go into a trust with the son as that is likely to prove to be more trouble than it's worth.

Naturally, be a bit aware of taking the average of the estate agent valuations, given that most properties sell for between 90-95% of the valuation given (plus they'll be saving the selling fees and also the hassle of the property potentially sitting on the market for the next 6 months waiting for a sale to be agreed).

Strikes me at the moment that most of the upside is resting with the seller, whereas in reality in this situation it should be resting with the buyer.



To explain further where I'm coming from -

Myself and my partner are about to make an offer on our first house and the situation is very similar to yours. Tenant is an elderly person who has gone into care. Family need to sell to pay for this. Property has been on the market for 9 months now and they're likely to accept over 10% less than it was initially listed for.

If the family had convinced someone to pay the estate agent valuation for the property 9 months ago, they'd be laughing.

grey_gym_sock

the trust idea is complete madness, even if it can fly. if you're going to buy your own home, and probably overpay by a few £10ks to help out relatives (nothing wrong with helping out relatives, and so long as you're aware how much you're over-paying, and are still happy to do it), you should at least end up genuinely owning your own home!