Buying parent's house for less than market value

btowill

My mum bought a second home a couple of years ago and rented out her old home for a year or so. She's since put it up for sale but had no luck finding a buyer.

We are currently saving to move house, but couldn't stretch to her asking price of £210K. She's offered to sell it to us for £180K on the proviso that I get £30k less from her estate in her will.

What are the implications of doing this? Is there a better option? Someone suggested buying an £180K share in the property instead, so that mum still owned a £30K share. I'd then inherit the remainder and own it outright on her passing.

Thanks in advance for any advice.

CLAPTON

which house is 'it'?

btowill

Sorry, she's selling the first house, which she rented out

perbinder

You really need legal advice regarding the shares and inheritance tax.

bitsandpieces

How long has the house been on the market for? If it has been on a good while at £210 and not sold, that's a good sign it might not be worth that much.

Taking advice could be sensible, if there is a reasonable chance your mum might need care or might die within the next seven years or so. However, given that offers for properties are often 10% or so below the asking price, you may be getting her house at near market value anyway.

TrickyDicky101

If it hasn't sold at £210k then it would not appear to be 'worth' £210k so doesn't sound to me that Mum is doing you any favours.

btowill

Thank you everyone, she's recently reduced the price by 10k and is selling it to me for £10 less than that (original asking price was £230k) but it's quite a quirky place and the particulars really don't do it justice in my opinion.
Asking price aside, what are the implications of this sort of arrangement? Would she have to pay CGT? Would my mortgage be based on the asking price or on the property value (seeing as I'd be paying full price for it in the long run?)
She is genuinely trying to help us out, as we wouldn't be able to afford a place in this village otherwise.

moneyistooshorttomention

Have you got any siblings?

If your mother goes into a care home at some point, then the Local Authority will grab for the equity tied-up in both houses and it may not be possible for you to be left £30,000 less (ie because the local authority had made it the case that there was nothing much to leave in the Will anyway by house-grabbing). If you have any siblings then, at that point, you would have to think of a way to reimburse them for the fact that you had already had £30,000 of inheritance (before the Local Authority started dipping in and maybe reducing that inheritance to share between you to virtually zilch). If you didn't, then they would end up inheriting less than you. Your choice at that point would be to find a way to stump up that money yourselves to ensure your sibling/s were in the same position as you or they would (understandably) fall out with you for having had more than them.

Also, siblings or no siblings, that £30,000 won't have any way to be adjusted for house price inflation and I can't see how that could work out either. If there aren't any siblings and therefore you/mother are free to have some inheritance early without other people potentially losing out, I think you would still need to have that gift as a percentage of the house price, rather than a fixed sum of money iyswim. I've often heard of people coming unstuck because they specified amounts of money in their Will, rather than percentages, and didn't take any account of inflation.

getmore4less

Don't get involved in any inheritance promises or joint ownership it will just complicate and introduces more problems than it solves.

She can put what she likes in her will so leave it at that.

It's not selling so what's it really worth?

If she wants £180 find out what a valuation would be and the excess can be a deposit with any other funds you have.

Has she had any offers?

how much can you raise on your own?

Mojisola

btowill wrote: »

My mum bought a second home a couple of years ago and rented out her old home for a year or so. She's since put it up for sale but had no luck finding a buyer.

If the price was right, it would have sold. I would want to get three EAs in to give a realistic price before thinking about anything else.

We are currently saving to move house, but couldn't stretch to her asking price of £210K. She's offered to sell it to us for £180K on the proviso that I get £30k less from her estate in her will.

What are the implications of doing this? Is there a better option? Someone suggested buying an £180K share in the property instead, so that mum still owned a £30K share. I'd then inherit the remainder and own it outright on her passing.

There could be all sorts of complications with the other options.

BitterAndTwisted

She can sell it you for any price she likes as long as your lender (if you will be buying it with a mortgage) values the property at or more than the sale-price.

Her issues with Capital Gains are not your problem but unless it's increased in value by tens of thousands of pounds in the last five minutes it's unlikely to attract much, if any at all.

All she has to do is survive for the next seven years and there won't be any Inheritance Tax on the difference between the sale price and the "actual value" either.

All this guff about shared-ownership and wills is nonsense and an unnecessary complication.