Buying off parent on the cheap before they flog it cheap

SmokingSpud

Hello all,

Potential First time buyer and newbie here. My boyfriend's mum (age 56 no care needed) wants to sell her house and got a valuation for it for 240k - her neighbour sold his house for 250k a month ago and it's exactly the same. However she wants to sell it quick and is even prepared to sell it to these quick sale websites for 200k ( but she'd settle for under that too) so she can move quickly. We think it's a shame to sell to these websites and therefore she would consider selling it to us for 200k.

My boyfriend and I have a htb ISA each and would be able to buy the property comfortably at 200k with a normal residential mortgage but are worried that we would be having to pay cgt or other taxes only because the mum wants to sell it as quickly as possible and therefore would sell it to me and my boyfriend below market value.

It is currently my boyfriend's and the mum's main residence. The mum would completely move out once sold.

Therefore are we worrying about nothing? When we get a mortgage I'm presuming we would have to get a mortgage for the difference between market value of house minus the 'gifted' amount - to end up at 200k - minus our htb ISA amounts. Is that correct?

I'm hoping you can help me and any replies are much appreciated

G_M

No CGT for mum - it was her main residence
No CGT for boyfriend/you - it will be your main residence
No additional SDLT - it will (I assume!) be both your & your boyfriend's only property.

But there is a 'gift' from mum to you both of £40K. If mum dies within 7 years, this £40K would be included in her estate. If her total estate is over the threshold at the time of death then Inheritance Tax might be due (subject to some other consideration too....).

AnotherJoe

What G_M said, your worries are unfounded and if you can get it at this price take the opportunity now while you can. You may even be able to get it without a deposit of your own (or with a much smaller one), theres a thing called "gifted deposit" where the difference between valuation and selling price counts as your deposit.

Only works when its a big gap, and usually, a family member, but you seem to qualify on both counts.

If gifted deposit doesn't work for you, then you'll need to find a deposit thats a percentage of the sale price, not the valuation price. So if it was a 90% mortgage, you'd need to find £20k if she sold it for £200k. The valuation price is irrelevant in that circumstance.

Find a broker to assist.

Hoploz

Does there have to be a 'gift' involved here?

I mean, can't she just sell the house for whatever she wants to sell it for?

If you have the ISAs do you have enough for a deposit on the house and the rest is mortgage? For example 20k from ISAs plus 180k from mortgage?

Or am I missing something here?

It's just that with a valuation from EA of 240k someone might still not get a buyer and end up accepting a lower offer - there is no exact valuation of a house is there?

eddddy

Hoploz wrote: »

It's just that with a valuation from EA of 240k someone might still not get a buyer and end up accepting a lower offer - there is no exact valuation of a house is there?

The mortgage lender would instruct a valuer (as with any mortgage application) and rely on their valuer's valuation.

If the valuer values the property at £240k and the OP purchases for £200k, it would be classed as a 'concessionary purchase'.

As an example, Halifax say...

Concessionary purchases can only be agreed for subsequent sales (not new build) in the following circumstances:

The property purchase is solely for the applicant(s) to live in as their main residence and the applicant is:

Purchasing from an immediate family member* at a discounted price (minimum of 10% discount is required) and the vendor must move out on completion


* The only relationships permitted for a concessionary purchase are (including vice versa):

Parent/child
Siblings/sibling
Grandparent/grandchild.

(Go to: http://www.halifax-intermediaries.co.uk/criteria/mortgage/default.aspx, then click on 'Lending' then 'Concessionary Purchase')

Thrugelmir

SmokingSpud wrote: »

However she wants to sell it quick and is even prepared to sell it to these quick sale websites for 200k ( but she'd settle for under that too) so she can move quickly.

What's the reasoning behind giving money away? Is she running away from something or somebody.

AdrianC

Hoploz wrote: »

Does there have to be a 'gift' involved here?

I mean, can't she just sell the house for whatever she wants to sell it for?

Yes, but...

It's just that with a valuation from EA of 240k someone might still not get a buyer and end up accepting a lower offer - there is no exact valuation of a house is there?

Correct. But with next door recently having sold for £250k, it's easy for anybody to question the £200k figure.

BUT in practice, it's not going to be an issue. First off, she's probably going to last a lot longer than the seven years. She's only 56! But also, if her house is her main asset, she's nowhere near IHT territory anyway.

supa34

thats a shame, if she sells to website then no inheritance gift, but if she sells to son then inheritance. If it was me i would get the website quote and keep hold of it to prove there was no gift involved.

G_M

I did not say inheritance tax would be payable. OP asked specifically about taxes, so I included that possibility.

* if mum survives 7 years - no IHT
* if mum survives 3, or 5 years- reduced IHT
* if mum's estate is below the threshold - no IHT
* if mum bequeaths her estate to spouse - no IHT
* if mum's Executers can show OP paid full value (eg by keeping the Quick Sale valuation, or other valuation) - no IHT

SmokingSpud

Thank you for all your replies - all very much appreciated.
She only wants to sell quickly as she wants to move in with her partner and she's had issues selling her main properties in the past so let's say she's scarred for life and quite frankly is very impatient. Anyway this is her only asset at the moment.

Thanks again!

AdrianC

Can she not move in with him while her place sells?