Buying ex out of house - can't agree what's fair?

HouseBuyer77

The posters who suggested these should be excluded are (fortunately for you) wrong.

Fundamentally there's no right or wrong answer. It's a negotiation between two people. I can see why OP's ex feels hard done by that the OP wants to slice off some non-existent fees from his equity (which then become equity in her house).

On the other hand I agree with OP that the £300k valuation is reasonable based upon the facts presented. Her ex is probably keen to go for £310k simply because it's the highest figure seen.

-taff

If he wants to take the highests valuation, I would definitely argue with that.
You could do as suggested and take the mean, or have a look on nethouseprices/zoopla/etc for recently sold prices and take into account the age and condition of your house.
You could always do that first and if you find it's benefiting you more, bring it up.

Finst

Razzmatazz wrote: »

Thanks Finst - this was my rationale on the situation, although it seems many people do not agree.

Do you know if there is any documentation or reference available online to this industry standard? Or would I be better off if I talked to a lawyer?

I never saw any documentation of the industry standard, so you may need a lawyer to confirm.


The others who are arguing that there is no industry standard and its down to what you and your ex agree are also right, but only up to a point. Should it go to a court to decide (which would of course be far more expensive), there is no doubt that the court would deduct fees for cost of sale, and potentially award an allowance for legal fees due to the other side being unreasonable. This should be a persuasive argument for you in your negotiations with your ex about what is fair, even if there is limited chance of it ever going that far.

Ozzuk

Couple of options:

1. Do nothing, he wants his equity fast so say if you can't reach agreement then you'll maintain the status quo. Who is paying the mortgage? You should factor in equity payments.

2. Reverse the situation - if he won't agree price, tell him you are willing for him to take the house on the terms you are offering. If he thinks its worth 310, let him take it and the risk.

Finst

You should also look at Form E - the form used in divorces to declare the value of assets to be divided. In that Form, the value of property is explicitly calculated as = Market Value - Outstanding mortgage balance - estimated costs of sale.


Again, not directly relevant to you as you are not married, but very powerful and further evidence his position on that point is out of line with general practice

saajan_12

I agree with you about taking the 300k valuation as a 'middle / most common' figure depending how you interpret the 'up to 300' EA valuation. I think you should assume the lower end of the range they give you anyway, as many EAs are fairly optimistic about values to get your business,, and then encourage you to lower.

I can see your point that the value should be net of any costs to realise that value. A house is just bricks, the 'value' only makes sense as what someone will buy / sell it for. An EA in theory can achieve more since they can market to a wider audience, but after the fee, the seller is accepting the net figure 300k - 5k fee for example. If you don't want the net figure, I don't think it's fair to use an EA's valuation, but rather the expected figure selling privately say 290k.

All this is academic, as in reality the 300k is a guide, beyond that it's a negotiation. How much are you willing to buy your partner's half for? How much are they willing to sell it for? Either you meet in the middle or wait it out until someone gives in / forces a sale.

Mojisola

If he isn't happy with the £300k valuation, suggest he gets a RICS property surveyor to give an opinion.

HouseBuyer77

Another way to look at it is what your positions will be after whatever deal you do happens:

Currently you have £100k equity (assuming £300k valuation). You seem to agree that £10k belongs to ex due to the deposit contribution, leaving £90k equity which you will split down the middle. So £45k 'raw' equity for you and £55k 'raw' equity for ex.

Say ex buys you out at your suggested price and valuation, you end up with house worth £300k, mortgage of £252'500, £47.5k equity.

ex gets £52.5k. He's down £2.5k on his raw equity, you're up £2.5k however he has liquid cash. You will incur costs to liquidate (assume the 5k you've put down for fees), so if you do so you both end up in the exact same position (i.e. 2.5k down on 'raw' equity).

If you sold on the open market and split as above a similar outcome would occur.

From those two scenarios I think I'll go back on what I originally said and say this seems fair.

However there's a third scenario, Ex wants to buy his own property. Keep it simple and say he buys a £300k house. Using £52.5k as deposit, he will incur some fees, £5k in stamp duty alone, add another £2k for solcitors/mortgage fees etc and he'll end up with a £300k house with £254'500 mortgage, £45.5k 'raw' equity, so 9.5k down on his original position (£300k house with £55.5k equity).

Of course you could say what he does with his money is his business so the third scenario isn't relevant.

Such worked examples may help in making your case to him.

TBagpuss

Razzmatazz wrote: »

Okay fair enough - I'm clearly wrong.

I thought it was fair to give him what he'd get if we sell, plus removing any stress and hassle from the equation.

It is fair. And it is standard practice to take into account notional costs of sale. You look at what youwould each get if the property were to sell now. So you would alsotake into account any ERC on the mortage, even if you are going to remortgage with the same lender and they agree to waiv the charge.

The approach a court would usually take would be to allow 2.5% - 3% of the gross value of the property for 'notional costs of sale (i.e. the legal and agencts costs if the proeprty were to be sold) and work out the split taking that into account.

The person remaining in the house would normally pay for the transfer into their name.

In terms of the value of the house it would usually be reasonable to ask the agetns what they think the realistic selling price would be (not asking price) and take the mid point of the 3, So if the figures you got were £300K, £305K and £310K it is reasonable to use £305K. If they were £300, £310 and £315 then use £308K. If you can't agree then you pay for a single. jointly instructed formal valuation by a surveyor and agree in advance that you will both acept whatever figure they come up with.

So in your specifc case, you are corec that the costs of sale should be taken into accoutn, but you're wrong that the lowest of the three values you have got is the appropriate one to use.

All that said, if you are relatively close to an agreement it may be simpler and, in the long run, cheaper to complromise than tio drag things out. It may be that you could offer to compromise by using your lowvaluation but not claiming the sale coss, and work out what tat does to the actual numbers compares with including the cost s of sale but taking the mid-point valuation...

Dird

Just say you'll agree to £310k but you're not returning your half of his parents gift as it was a gift, so you still keep the £5k & give him £55k