Bit of help if you can..

stevo1405

Hi ! , O.k the situation is like this ... A friend of mine is about to have his house repossed and instead of the building society selling it for what they have outstanding on the loan i.e 80k , he wants me to buy it for 80k , then sell it for the true value - £140k and split the money with him.

Does any know if this is ok ? , whats the best route of finance ? , what are the tax implications on the capital gain etc , if any one is a financial advisor and can help , let me know , im based in Leeds.

homer_j_3

Can you not lend him the money to pay the arrears. Talk to a solicitor about protecting yourself and then get the house on the market and take a set return on the money you have lent.

That to me would be a better idea.

Emmzi

If the building society get all their money back, then there's no problem, whatever you do in a private deal is up to you.

However the BS are obliged to get the best price they can. eg if he owes them £80k, they can't just flog for 80k. They may auction and get, say, £120k. Then he gets £40 back. In the deal with you he'd get £30 back.. and give £30k away. It isn't making sense to me that he'd just walk away from a potentially huge pot of cash.

If it's an attempt to keep money from BS in some way (haven't worked out how but it does seem a bit suss instead of just whacking it for sale on the open market) then it's fraud.

from your perspective - what if the house doesn't sell at the price and you're lumbered? what if there *is* no profit? have you costed it all up? solicitors, estate agent, etc etc etc.

Gut feel? Something fishy, steer clear. Get him to sell it himself, dropping the price if need be, and pay off loan himself. He's no worse off at the end of the day.

cattie

The lender is legally bound to try to get the best price possible for the house, so first it will in all probability be marketed via an estate agent at a price their valuer thinks it should achieve.

Even when an acceptable offer has been accepted by the lender, they have to put a notice in a local paper inviting higher offers, so you have very little chance of securing the house at a bargain price unless it's in some god forsaken place where property is hard to shift.

There is a lot of competition around for repossessed properties, everybody is after a bargain, but the give away prices of old are long gone since lenders now have to ensure they do get the best price possible.
Homer's suggestion is a much better & more charitable approach towards a friend.

stevo1405

Thanks for that , firstly he does not want to stay in the house , what he wants to do is sell it to me , him privately not the building society before the repossesion for the amount outstanding on his mortgage loan , as long as they get there money im not doing anything wrong am I ? , surely he can sell his house for as little or as much he wants as long as it covers his debts or am i being dim ? , it was supposed to be repossesed last month but the court gave him 28 days to prove it was in the process of being sold ..

silvercar

So all you are doing is making sure the sale goes through before possession, right?

Problems for you:
1) can you afford to wait say 3, 6 or even 12 months before the property is sold?
2) if you buy for 80k and sell for 140k, you will have capital gains tax to pay on the difference.
3) presumably he lives in the property until it is sold, what happens if he has nowhere to move to? or decided not to move, do you evict him?
4) id he a close enough friend to ensure he doesn't walk into the sunset leaving you with a house that won't sell.

stevo1405

silvercar wrote: »

So all you are doing is making sure the sale goes through before possession, right?

Problems for you:
1) can you afford to wait say 3, 6 or even 12 months before the property is sold?
2) if you buy for 80k and sell for 140k, you will have capital gains tax to pay on the difference.
3) presumably he lives in the property until it is sold, what happens if he has nowhere to move to? or decided not to move, do you evict him?
4) id he a close enough friend to ensure he doesn't walk into the sunset leaving you with a house that won't sell.

hi

1) yes , but i have been told by two estate agents it should sell quite quicjky in that area its quite sought after.

2)capital gains tax . i wondered about that 40 %?

3) he is moving in with his girlfriend

4) yes , and even if he wasnt i would have paid 80k for an indepentantly valued house at 140k

Emmzi

don't believe estate agents - they're only after commission!!!

MortgageMamma

capital gains tax payable if its your second property

your friend could potentially remortgage himself subject to circumstances in time to stop the reposession i deal with this stuff daily

I would be cautious if I was you, your friend could be planning on bancruptcy and sale of an asset such as a house anything up to two year prior could be classed as disposal of assets

I would seek the advice of a solicitor and a taxation specialist on this if i was ou before you take matters further. Also, speak with a good mortgage adviser who could advise you on affordability and the best way around this

its also a good idea to let your friend know there are companies around who will buy a house the next day for cash iand rent it back to them if they are in trouble, but the max these companies ever go to is 85% of the property value

lynnexxxo

Hi

The thing I don't understand is, if the house is worth 140K then surely he could sell the house quickly for say 125K (a bargain in sought after area, in a price range that a lot of FTB -hence no chain, could afford), which would net him 45k profit rather than the 30k you have promised when you sell the place.

I understand why you are very keen on the deal but fail to see why your friend would be happy to get 30K when he could very easily get 45k or even more.

If you want the best deal for your friend then why not set up an agreement that you will loan him the money to get the mortgage company off his back in return for the money back, and say a bit extra when his house is sold for the full market value.

pollyanna24

I was always under the impression that you couldn't just make up the value of a house and sell it for what you want.

Selling at £80K would be avoiding stamp duty on a house worth a lot more.

Surely the Inland Revenue would be interested in this.

Otherwise I'm sure lots of parents would sell to their kids so as to avoid tax.