please help with buy out price...

ickledee

hi, looking for some advice

my partner bought his flat in Dec 2006 for £85K (scotland so not effected by current crash).. He bought with a friend and the fixed rate period was for 2 years.

He is looking to get bought out of his mortgage just now by his friends partner.

we have looked into the sale prices of all similar properties in the street which have sold in the last 12months. The prices consitantly range from £97,125 (july 2007) - £99K (jan 2008).

How do we determine a fair buy out price???

The other party thinks that the above sale prices are unrealistic and thinks 92K would be nearer the mark.

Since moving in the place has been modernised, new flooring, fitted wardrobes, back door, re-wired, new combi boiler etc.. He is also leaving all contents and furnishings.

The other party has decided that a free valuation is the way forward. How do I make sure the valuation reflects the current sale prices??

Any advice would be much appreciated

Kez100

I've always thought a half share shouldn't be valued at exactly half anyway. To start with it's harder - almost impossible to sell half a house, so you really have only one buyer. Then, if a proper sale went through there would be a lot of extra expenses - EA fees for one which you are saving but the new owner will have to bear if they sell at a later date. Then, you have to add to that today's sentiment.

ickledee

thanks for your reply much appreciated

My partner wanted to stay at the property until the fixed term was up in Dec and sell the property together. However, his friend does not want to sell and wants to move his girlfriend in and so my partner is doing him a favour by agreeing to be bought out just now. My partner is now looking for a new property and so will be incurring all his own legal fees for buying

Imp

How about;

Each party has the house valued by a professional surveyor (not estate agent).
The agreed value of the house is the average of the two valuations.

pinkshoes

Agree with Imp; get a couple of professional surveyors in to value the house, and take an average value. Or get an EA round, as they often seem to overvalue properties so that you'll sign up with them.

Your OH is indeed doing this friend a favour if he is willing to wait until the fixed period is ended. Kez is right that there's only going to be 1 buyer for half a house, but the alternative is no sale, which your OH is happy with, but not what the friend wants.

Get the valuations done, then split the costs 50/50 of the selling process.

Kez100

I agree now we have further information. If you OH really does not mind not selling then it's a different matter.

real1314

The normal "half share" valuation shouldn't apply in these situations, as there are really 2 potential buyers - if your OH's friend who wants to buy out tries to set a "low" price, your OH could say "Ok, that's a fair price, I will buy it off you!"

I'd suggest 3 valuations and average it.

ickledee

Thanks for all your advice We have arranged for a valuation

PasturesNew

You might also like to factor in that they might want half the selling costs.
e.g. half what an EA would charge to sell it

This is because even though you aren't incurring these now, at some future point they will have to be paid.

This is quite often a legitimate sum factored into these type of "selling half back to somebody" deals, so just be aware of this as the general consensus of opinion is that it would be a valid sum.

Imp

real1314 wrote: »

I'd suggest 3 valuations and average it.

Common method is to do the two valuations as previously described. If they are wildly different, the two surveyors elect a third surveyor who values the properties. His valuation is binding.

What you are after is a transparent, open system of valuation which they can both agree on.

ickledee

PasturesNew , thanks for your advice You mean cover half their selling fees even though my partner is incurring lawyers/survey fees etc to buy a new place when he would rather stay where he is?