Buying Grandads House - First Time Buyer advice needed

Burribro

Apologies if these are commonly asked questions...


My wifes Grandad is currently 95 and living with other family members. As a result his house has been vacant for a good 18 months at this point, and the family are finally looking at the potential of moving it on, with no real urgency as money isn't really a problem for those looking after him - which is an excellent position for them to be in.


My wife and I have viewed the house and it is in desperate need of being dragged into the 21st century - tiny kitchen, dated bathroom suite, wallpaper peeling, cracks in plaster etc. The house is likely to be valued around the £175k mark (assuming prices of houses sold along the road), but it is likely that we will be able to buy it for £150k. We are in the fortunate position of £20k in savings from various inheritance which means buying the property will be no problem.


The problem comes from completing the renovation work. It needs a complete rewire to bring it up to current regulations, the boiler whilst works will need changing etc etc. and from talking to various family members in the trade it will need about £20k of work to bring it to a good finish.


If we purchased the property at £150k, would we be able to mortgage it at market value in order for us to complete the works? We do not have the additional savings to be able to pay for the work up front.


As we are first time buyers as far as I know we won't have to pay stamp duty, does this change buying it from family?


Are there any legal problems we need to be aware of buying a house from family? Obviously the money from the sale would go direct into accounts of the Grandad, so would he need to declare Capital Gains?


Finally, can anyone offer any other advice in what to look out for in renovating a house that hasn't had any real work done on it for about 15 years?

hazyjo

Burribro wrote: »

The problem comes from completing the renovation work. It needs a complete rewire to bring it up to current regulations, the boiler whilst works will need changing etc etc. and from talking to various family members in the trade it will need about £20k of work to bring it to a good finish.

Most houses aren't up to current regs. In fact, even a house a few years old. Are you sure it actually all needs rewiring?

And if the boiler ain't broke, don't fix it. Why do you feel it's essential to change it? Mine's old but I won't be changing it any time soon.

Burribro wrote: »

If we purchased the property at £150k, would we be able to mortgage it at market value in order for us to complete the works? We do not have the additional savings to be able to pay for the work up front.

The market value is the price it's sold at. You can't borrow more.

Burribro wrote: »

Finally, can anyone offer any other advice in what to look out for in renovating a house that hasn't had any real work done on it for about 15 years?

Is that all? 15 years isn't that long really! What sort of work do you think it's lacked? I'd be checking roof, maybe chimneys, electrics, structure and windows.


PS roughly when was the house built?

ACG

You can with some lenders buy it for £175,000 using the £25k as some/all of the deposit.

It should not affect stamp duty.

You may have problems if you buy it under the market value and Grandad has to go in to a care home, more so if his £150k runs out.

Pixie5740

If the property is valued at £170k and sold to you for £150k your grandfather would in effect be gifting you £20k of equity. That £20k could be used as your deposit, it's called a consessionary purchase but I don't think all lenders accept it.

The SDLT exemption for FTB applies even if you are buying from family.

saajan_12

Burribro wrote: »

Apologies if these are commonly asked questions...


My wifes Grandad is currently 95 and living with other family members. As a result his house has been vacant for a good 18 months at this point, and the family are finally looking at the potential of moving it on, with no real urgency as money isn't really a problem for those looking after him - which is an excellent position for them to be in.- selling at market value of that house is fine as the value is still owned by Grandad (in the form of property or cash). You can get complications with deprivation of assets if he needs care when he gives away some of the value e.g. by selling under mkt value


My wife and I have viewed the house and it is in desperate need of being dragged into the 21st century - tiny kitchen, dated bathroom suite, wallpaper peeling, cracks in plaster etc. - okay, do you actually want the house? If not, why not buy something that fits exactly what you want in timeframe, condition etc and let Grandad sell on the open market? The house is likely to be valued around the £175k mark (assuming prices of houses sold along the road), but it is likely that we will be able to buy it for £150k. - why? Does the £175k reflect the condition of this property? If yes then Grandad is gifting you £25k We are in the fortunate position of £20k in savings from various inheritance which means buying the property will be no problem. - remember you'll also have survey fees, mortgage application fees, solicitors costs, removals, and SDLT (unless you're both FTBs) to come out of that £20k.


The problem comes from completing the renovation work. It needs a complete rewire to bring it up to current regulations, the boiler whilst works will need changing etc etc. and from talking to various family members in the trade it will need about £20k of work to bring it to a good finish. - What are the actual issues and do they stop it from being mortgageable? Regulations are constantly changing and properties don't NEED to keep up to the current regulations. Is the wiring / boiler actually unsafe? 'Good finish' doesn't need to be done immediately, can wait until you have built up savings.


If we purchased the property at £150k, would we be able to mortgage it at market value in order for us to complete the works? -What's the value in the current condition? You may be able to buy at the market value with a gifted deposit of £20k but this would restrict your choice of lenders and would need the valuer to agree with your 'market value'. We do not have the additional savings to be able to pay for the work up front.


As we are first time buyers as far as I know we won't have to pay stamp duty, does this change buying it from family? - No, you pay stamp duty on the sale price, including mortgage, gifted deposit etc.


Are there any legal problems we need to be aware of buying a house from family? - He may need to show the property was purchased at market value (or how much of a discount / gifted deposit he gave) if deprivation of assets becomes an issue. Obviously the money from the sale would go direct into accounts of the Grandad, so would he need to declare Capital Gains?- He'll have Private Residence Relief on CGT for the period he lived there as is main home, plus the last 18 months of ownership - if that covers the full period of ownership, then CGT = £0. If not, there are further allowances if Grandad has rented the property out, and an annual allowance of £11.3k.


Finally, can anyone offer any other advice in what to look out for in renovating a house that hasn't had any real work done on it for about 15 years?

1) Firstly, do you actually want THIS house at THIS time in THIS location? Why not look for a house on the open market that ticks more boxes for your personal needs?

2) What is the market value of a house in THIS condition? Does the £175k reflect the work needed? You certainly won't be able to mortgage to a value of a house in 'good finish' when you're buying a run down house.

3) Are you sure the work is needed immediately? If it's still mortgageable, I'd purchase at market value now and then do works as and when you can afford them. If Grandad wants to sell to you at a discount, then he can leave you that amount in his will - then there's no issue of deprivation of assets, mortgage valuation, ..