selling your house to yourself

DamoKen

Hi, bit of a weird title, but partially correct. I've got a house I bought 4 years ago which has increased in value significantly since I bought it. My younger brother who has been looking to buy for a while has been asking me to sell it and go in on a place with him as he couldn't afford on his own.

Now rather than go through all the hassle of putting the house on the open market and looking for a new place, solicitors fees, auctioneers, etc, we're looking into the possibility of him coming in on my house. Makes a lot more sense as it gets him a stake in property, should return me some healthy capital for another investment, and most importantly, leaves all the middlemen out in the cold, at least I hope so.

So just wondering if anyone has ever done this and what's involved, possible pitfalls etc. Also wondering, as I'll be essentially remortgaging my house to it's new market value with my brother going co-owner, would we be susceptible to any form of stamp duty/tax? He'd be a first time buyer by the way.

cheers

FillSpectre

You are selling half your house to your brother. Done all the time. You can either set up a contract where you agree to sell in a set time and/or if one wishes to sell the other person has first refusal. Really quite simple. BBC had a show with complete strangers buying together.

I personally wouldn't buy with my brother becasue sooner or later he would disappear and I'd be laying a patio at midnight:D

sapper

Firstly get a decent accountant to look at this transaction for you, as their are a few issues regarding tax and division of ownership which would need to be sorted out....

Apart from that, my one piece of advise to anyone doing buying with a relative/friend (speaking from personal experience) - make sure the exit method is agreed beforehand ie. if one of you wants to sell.

I bought with a friend a few years back and we agreed that if one wanted to sell, 1) the person other had six months to buy prior to it going on the market and 2) we would get three valuations on the house and use the middle valuation as the sale price

No.1 is fair enough as you don't want your brother calling you in Jan one year, saying he wants to sell in two months and you have to buy him out or loose the roof over your head - at least you will have a good amount of time to get yourself sorted out. No.2 is my downfall though - in hindsight we should have agreed to establish the value by putting the house on the market, taking in bids from the buying public and use the highest bid as the value of the house (you then of course take it off the market and sell it privately between you). As you see elsewhere on this forum, houses are selling for 10% above asking price, so using this method the person selling out (me, presently) is losing approx 10% :mad:

Apart from that, I think it is as you say, just like you as an legal entity are selling to you+your brother as a legal entity. And yes, this will probably mean you are hit for stamp duty again, and you might even get hit for clawback stamp duty if you've been in the house for less than five years (correct me if I'm wrong anyone!). Your brother probably wouldn't get his FTB stamp duty rate either as he is buying jointly with you.

An alternative to this is if your bank agrees to let your brother become a party to the existing mortgage + plus any additional re-mortgages (so that you can get your cash). This would mean your brother would become liable for 50% of the borrowings on the house without any cash from him up front. You would then need to get the solicitors and perhaps a decent accountant to figure out how you split the equity in the house. I know the banks sometimes allow this kind of thing, but its totally at their discretion.

Basically, talk to your bank first see if they'll go for it, then get an accountant to figure out how it will work and finally get a decent solicitor to sort it all out.

PS You are wise to stay away from trying to buy a whole new house. Take it from me, it's a bloody nightmare trying to buy a house in Dublin these days....

Victor

It can be done and it can either be done simply or much more complicatedly.

For a start, I suggest that you each have your own solicitor to advise you, so not only is each given independent legal advice, neither is there the later accusation that someone didn't get independent legal advice. This is something that a court would look at in the case of a dispute. Either of these solicitors could do the actually conveyancing. I imagine each solicitor would charge maybe 300-500 euro for the advice and given its a non-contentious transaction, the conveyancing fee should be lower than usual.

Regarding valuations, you would like a high valuation, he would like a low valuation. Pick an estate agent each and get them to agree a third. Get them each to do a valuation, no doubt there will be a spread. Inform them of what you are doing and that you want a real valuation, not just a low starting price to get bidders in, nor a high "on the market" price to encourage you to sell.

Typically this spread will be 10%+. Arrange a formula for then deciding a single value - use an average of the 3, the middle one, the one form the third valuer or the average of the two that are closest to each other. Lots of options there. Each estate agent might seek a fee of 100-200 euro.

The last part is arranging the contract between you, which you both will need to guide the solicitor on. I'm not sure if there is a standard contract for this, but it is becoming more and more common.

Take a look at this thread http://www.boards.ie/vbulletin/showthread.php?t=173124

sapper

The actual market value of a house is the highest amount that someone is willing to bid for it on the open market. In todays market, any value provided by an estate agent is going to be lower than the price achieved by putting it in the market.

Since Jan of this year, if you ask an estate agent to give you the actual value rather than a marketing price, most of them will say that the value they are giving you is the anticipated market value ("AMV") and that is their estimate of the final price. In todays market the "AMV" is about 10% less then the price achieved on the market.

The only way to establish the fair value of a property is to pay the estate agent marketing fees (about EUR300) and start taking in bids. When you get the best bid, thats the market value you should use - none of this guff about 3 estate agents. I should know - I've lost about 25K using the "three estate agents" method!:mad:

Victor

sapper wrote:

Since Jan of this year, if you ask an estate agent to give you the actual value rather than a marketing price, most of them will say that the value they are giving you is the anticipated market value ("AMV") and that is their estimate of the final price. In todays market the "AMV" is about 10% less then the price achieved on the market.

So add 10%.

Of course, there is the perception that he market is over-valued, so any valuer is unlikely to put his profession indemnity insurance at risk for a over-hyped price.

DamoKen

cheers for all the replies guys, yeah have been a little concerned about the estimated compared to actual value of the house as I could stand to lose over 35k, not something to be done lightly. I've set up a few valuations over the weekend now and also arranged a meeting with solicitors to go through the legalities, tax implications etc.

Again thanks a lot, a lot written there to consider.