House sale, tax implications, family help

JessWebster78

Morning, 

Please can someone help me work through this - I’m going round in circles at the moment: 

My mum lives on her own in a mortgage free house and due to health problems needs to downsize to a bungalow. She has found a bungalow which suits her needs. Her offer was accepted. Her house has been on the market and unfortunately a sale has just fallen through due to findings in the survey - they’re pretty big issues - asbestos in garage, loose / missing roof tiles, needing new roof in next few years, windows, doors, damp etc. Basically it needs gutting and modernising. She can’t afford to rectify the problems.

She’s absolutely devastated and does not want to lose the bungalow. Myself and my brother will be receiving an inheritance in a couple of months which would enable us to go halves on the bungalow but I’m worried about the tax implications of this. It’s really a last resort for us because we would be buying this bungalow before her house has sold. We both already own our own homes. 

Can someone run me through any viable options please? 

Keep_pedalling

The best option would be for you to loan your mother the money for her to purchase the bungalow, and for her to repay you when the house is eventually sold. The purchase will be subject to an additional 3% SDLT but providing she sells her current house within 3 years she can claim that back. Something you won’t be able to do if you purchase it in your own names.

You can protect your loan with a charge on the bungalow. 

SiliconChip

I'd suggest that you investigate selling the current house at auction (a proper one, not modern method), it sounds like the sort of property that would be of interest to a Homes Under The Hammer type buyer. She won't get as much as if the house was in good condition, but if she can't afford to do the work then it makes sense to sell it as soon as possible to avoid issues getting worse.

JessWebster78

Sorry I can’t quote for some reason. 

Thank you both. 

Would there be capital gains tax to pay with their officially being a “second home” ? 

We are looking at putting the house up for auction - why would you say traditional rather than online / modern method? 

JessWebster78

Would the SDLT be paid at the same time as the purchase? So we’d have to factor that into the loan amount? 

aliby21

TBH those don't necessarily sound like big problems with the house to me.  They are the sort of things that come up here all the time that a surveyor has pointed out which are basically backside covering, but can frighten off less experienced buyers.   Unless it is utterly obvious major issues like your mum has buckets under holes in the roof, mould everywhere from damp and bags of loose asbestos fibres in the garage.  I wouldn't be inclined to rush to auction, I'd just remarket. Have an upfront discussion with your EA who can discuss with EA for the bungalow sellers to get an idea of if they are prepared to wait awhile for your mum to get another sale. How far advanced is the upward chain?  I don't think it is time to panic yet!

Albermarle

aliby21 said:

TBH those don't necessarily sound like big problems with the house to me.  They are the sort of things that come up here all the time that a surveyor has pointed out which are basically backside covering, but can frighten off less experienced buyers.   Unless it is utterly obvious major issues like your mum has buckets under holes in the roof and mould everywhere from damp.  I wouldn't be inclined to rush to auction, I'd just remarket. Have an upfront discussion with your EA who can discuss with EA for the bungalow sellers to get an idea of if they are prepared to wait awhile for your mum to get another sale. How far advanced is the upward chain?  I don't think it is time to panic yet!

This is what I was thinking. There are threads on this forum pretty much everyday about surveys on older house highlighting similar points .
they’re pretty big issues - asbestos in garage, loose / missing roof tiles, needing new roof in next few years, windows, doors, damp etc.
These are issues, but not big ones, and someone buying an older house in need of some modernisation ( that they presumably viewed) should have been expecting some issues from the survey.

Normally it is not a good idea for the vendor to try and fix all the problems. It is easier/better just to sell as is, even if she has to drop the price a bit . 

What does the EA think ?

_Penny_Dreadful

JessWebster78 said:

We are looking at putting the house up for auction - why would you say traditional rather than online / modern method? 

Most buyers will not touch a property being sold via the modern auction method with a 10' barge pole so your mother would drastically reduce her pool of buyers.

_Penny_Dreadful

JessWebster78 said:

Morning, 

Please can someone help me work through this - I’m going round in circles at the moment: 

My mum lives on her own in a mortgage free house and due to health problems needs to downsize to a bungalow. She has found a bungalow which suits her needs. Her offer was accepted. Her house has been on the market and unfortunately a sale has just fallen through due to findings in the survey - they’re pretty big issues - asbestos in garage, loose / missing roof tiles, needing new roof in next few years, windows, doors, damp etc. Basically it needs gutting and modernising. She can’t afford to rectify the problems.

She’s absolutely devastated and does not want to lose the bungalow. Myself and my brother will be receiving an inheritance in a couple of months which would enable us to go halves on the bungalow but I’m worried about the tax implications of this. It’s really a last resort for us because we would be buying this bungalow before her house has sold. We both already own our own homes. 

Can someone run me through any viable options please? 

Is the vendor of the bungalow going to hang around waiting for you and your brother to receive your inheritance?

If yes, then you and your brother could lend your mother the money to buy the bungalow and place a charge against the bungalow to secure the loan until it is repaid.  From the date of completing the purchase of the bungalow your mother will have 14 days in which to report and pay the SDLT (assuming you are in England) to HMRC.  As your mother will be purchasing an additional residential property the higher rate of SDLT will apply to the purchase of the bungalow.  Your mother will be able to reclaim the additional SDLT providing she sells her current home within 3 years of completing on the bungalow. 

Capital Gains Tax is unlikely to be an issue as your mother will receive Principe Residence Relief for the time the house was her only or main residence plus the relief for the final 9 months of ownership.

Keep_pedalling

JessWebster78 said:

Would the SDLT be paid at the same time as the purchase? So we’d have to factor that into the loan amount? 

Yes, it has to be paid within 14 days of the purchase. 

JessWebster78

Thanks everyone. 

Bungalow seller is on holiday this week so that gives us a bit of time to get something else in place. Daughter of owner is selling for care home fees so hopefully we can keep the purchase on track as it’s vacant too. 

The ex buyer of mums property kindly gave us a copy of survey. It was very negative and made it sound like a complete dump tbh so I’m. Or surprised they walked away (they were first time buyers) 

Mum has decided to list her house on the online auction today. I have voiced my concerns about limiting the number / type of buyers but her and my brother were adamant so I was outvoted really. Will see what happens next with that…

Thanks for all of your help so far