Should I buy out my siblings - & how?

grassmarket

Sadly, I & my siblings are about to inherit our parents’ house. I’m thinking of buying them out - not to live in, but as a short-term investment - until my own future plans, (as well as the effects of COVID & Brexit) are clearer. They are happy for me to do so. 

Of course we’ll be taking professional advice on this, but in the meantime: what selling & buying expenses should we include - to make the transaction as fair as possible to each other? If we were selling to a 3rd party, we’d jointly have to pay for an an estate agent, solicitor, removals, cleaning...as a buyer I’d have to pay survey, stamp duty, more legal fees...I’m hoping that by settling the sale privately among ourselves, we can (legally!) avoid some of these costs & fees to the benefit of us all, but it must be fair.
I’d be interested to hear what people think - & perhaps the experiences of some who’ve already done exactly this!

greatcrested

1) agree valuation, though I imagine you have this for Probate.

2) who are Executer(s)? He/They can transfer direct to you from parents' name(s). No need to register in siblings' names first

3) If the Executers do the transfer, no EA fees, no solicitor's fees (assuming no mortgage on the property) so you simply divide the valuation by number of siblings and transfer funds to them accordingly.

4) of course, if you need a mortgage to buy them out you'll need a solicitor. Your cost. But the Executers will also prob need a solicitor and that cost will come from the Estate.

5) survey? Searches? Why do you need these? Do you not know all you need to know about the property? Searches may be needed to satisfy your mortgage lender if any, but again, that's your cost.

But the big issue is - do you really want to start a letting business? I assume you plan to let, not leave it empty to 'increase in value'.....!?

What do you know about being a landlord? Have you done a full business plan and budget?

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steampowered

If you are taking a mortgage, all costs associated with that are your cost as the buyer. If you were buying a house you wouldn't ask the seller to split the bill for your mortgage valuation !

No EA should be required.

Costs relating to administration of the estate should be paid by the estate.

getmore4less

agree a price.
Selling cost are often small change  1% + <£1k 
clearance etc. depends how far you want to go, often it is a joint effort by family does that have to change?

Work out how you will fund the buyout that will drive the other costs that you should cover.
If you don't need a mortgage you won't need anything just put the cash into the estate and transfer title to you. 

With a mortgage then buying off the estate with your share/cash as the deposit is often easiest as that is a normal conveyancing process

There is the option that siblings lend you the money(their share valued) and you pay them back later. 

dimbo61

If your buying to let out then the costs of buying the property can be offset against the profit ( if any )
that you make from running your new rental business.
Should you buy with your Other Half ( joint tenants or tenants in common )
Are you a higher rate taxpayer ?
Do you already own your own home ?
Inheritance tax !
Is the property a suitable vehicle to rent out ?
Yield ?
Can you get a BTL Interest only mortgage ?
Have you got the funds to prepare the property for rent ?
GSC, EICR, Smoke Alarms, CO alarm,  fire safety, 
Would you be better just selling ?

xylophone

Why not just sell and have done with it?

ic

Won't the OP be at risk of capital gains tax too if they sell the house in the future?

grassmarket

Thanks very much for all your advice so far. Sadly Dad did die yesterday, so I’m a bit busy, but will read through carefully.
To answer a few queries: I only plan to buy out for cash; no plans to rent - just keep for our & family use until our own plans become clearer; no inheritance tax likely; I’d buy it jointly with spouse.

If we did sell to 3rd party now, the estate would incur selling costs; by buying it myself I’d be saving siblings their share of those costs, so presumably that should be taken into account in the overall purchase price? Or is that too hard-nosed? And so, if there are any real costs that I’m being spared as purchaser, I should allow for those too. What is OP?
Interest rates are rubbish, & so many other uncertainties just now, so we’re happy to sink capital into the house until we know what we want to do with it. 
If this explanation provokes any further thoughts, please let me know - many thanks.

saajan_12

grassmarket said:

Interest rates are rubbish, & so many other uncertainties just now, so we’re happy to sink capital into the house until we know what we want to do with it. 
If this explanation provokes any further thoughts, please let me know - many thanks.

House prices are probably more uncertain than most other investments..
- is the current market just propped up from the stamp duty holiday / pent up demand from people who couldn't buy in the initial lockdown? 
- with economic and wage uncertainty, will affordability and hence demand drop?
- with TLTROs and BoE stimulus, could banks lend more, spurring on house prices? 

There are successful landlords who make property into a profitable service & business & investment.. but at least part of the return comes from rent, not just capital appreciation. Without the rent, you have costs for SDLT, council tax, insurance, mortgage interest, maintenance, etc etc and are banking on future appreciation 

steampowered

grassmarket said:

If we did sell to 3rd party now, the estate would incur selling costs; by buying it myself I’d be saving siblings their share of those costs, so presumably that should be taken into account in the overall purchase price? Or is that too hard-nosed? And so, if there are any real costs that I’m being spared as purchaser, I should allow for those too. What is OP?
Interest rates are rubbish, & so many other uncertainties just now, so we’re happy to sink capital into the house until we know what we want to do with it. 
If this explanation provokes any further thoughts, please let me know - many thanks.

Really sorry to hear about your Dad.

The only seller transaction costs you will be saving are estate agent costs. Personally I would take estate agent costs into the sale price you agree with the siblings. 

Buying the house to keep it empty is not sensible from a financial point of view. Empty houses still need looking after. The average baseline you might expect from house price increases in future is perhaps 2% a year, which is not as good as what you would get from a normal investment. 

If you aren't planning to move into the property or rent it out, you should sell it. While it is nice to keep your parent's home "in the family" there is no sense in owning an empty property.

I wouldn't go through the cost of conveyancing / buying the property just to give you more time in terms of deciding what you want to do with the property - you are going to need to make a decision on that some time soon so its best to decide now.

If you are looking for a home for your money that offers better returns than savings accounts, you should consider opening a stocks & shares ISA. The average annual return generated by the major stock markets is about 7-8% per year, or a bog standard medium risk investment fund which holds a combination of shares and corporate bonds (what most UK consumers will invest in) generates about 5-6% per year. Head over to the Savings & Investment board which has lots of great information.

SpiderLegs

I just don’t see what the point of this plan is. 

If the property is going to be left empty why bother?
It just sounds like a plan for you to lock in some potential future gains to the detriment of your siblings. It sounds like they are happy with that though. I’m not sure I would be tbh.

Why not sort out your future plans first and then decide if you want to buy it later?