Selling for other house + cash

H8GHOTI

An idea, I’d like some opinions on.

Person A has a house for sale - €490k.
Person B agreed to buy, if they sold their own house for €320k. However after 10 weeks they have not sold. Went sale agreed for €315k but it fell through.

Person A is also building a house & that is about 6 months from completion. After they sell house A, they need a place to live while building is finished.

So the idea is that person B gives person A their house, plus cash to make up the difference. Person A can live there while they finish building their other house. Then sell house B next year.

The benefits are that both houses get sold this month & person A doesn’t need to look for somewhere to rent. The alternatives are person A puts house back on the market or waits longer for person B to sell their place. Both options delay the sale of house A. This idea seems to solve a lot of problems.

Trying to figure out the best way to sort this out & any potential pitfalls for person A. Person B is on board and I can’t think of anything bad for them in this scenario. Person A is taking the risk that they will struggle to sell house B next year & the value could also drop with covid etc....

Trying to think of other implications. Would person A need to pay any taxes selling house B next year? There’d be two lots of solicitor fees. Anything else?

H8GHOTI

The other consideration here is the estate agent.
Both A & B are using the same agent.

Person B apparently chose him to sell their own house because he was selling house A. To date he hasn’t sold either. Not saying it’s his fault. He has found a buyer for house A, just they haven’t been able to purchase because house B hasn’t sold.

Would you approach him about commission? Theoretically, A & B could do this now without him but feel uneasy about that. But does he get full commission considering person A is doing them a favour by buying house B & moving everything along. Should he get a “finders fee”? What would be appropriate? I mean he has advertised, done viewings etc...

Opinions welcome on this & the idea in general?

antoinolachtnai

I can’t see why the agent isn’t due his full commission. If you feel like it you could try to bargain him down to seven eighths of the total amount but he will probably want cash up front to do this. He needn’t get the whole lot until cash becomes available but I would say it is fair and also important for future relations that he gets his money. (A solicitor may be unwilling to carry out the transaction if you do not plan on paying your professionals, for example.)

This is all legally intricate so you would need the advice of a solicitor. Usually these arrangements don’t make a lot of sense but this one doesn’t look too bad in principle.

Claw Hammer

H8GHOTI wrote: »

The other consideration here is the estate agent.
Both A & B are using the same agent.

Person B apparently chose him to sell their own house because he was selling house A. To date he hasn’t sold either. Not saying it’s his fault. He has found a buyer for house A, just they haven’t been able to purchase because house B hasn’t sold.

Would you approach him about commission? Theoretically, A & B could do this now without him but feel uneasy about that. But does he get full commission considering person A is doing them a favour by buying house B & moving everything along. Should he get a “finders fee”? What would be appropriate? I mean he has advertised, done viewings etc...

Opinions welcome on this & the idea in general?

An agent is entitled to his fee if he introduces a ready able and willing purchaser. It appears he has done that, if the arrangement proposed goes ahead.
As to the wisdom of the proposed arrangement, it could be very messy if it goes wrong.

H8GHOTI

antoinolachtnai wrote: »

I can’t see why the agent isn’t due his full commission...

He hasn’t found a buyer for house B. Person A doesn’t necessarily want to buy house B, only doing it to move the deal along. There is the benefit of not needing to rent somewhere for 6 months but if they got €490k straight that wouldn’t be much of a concern. If person A didn’t come up with this idea everything could fall through.

A & B went sale agreed about 10 weeks ago and person B is unable to buy house A because they haven’t sold their own house.

How long does A give them? If A takes the house off the market or looks for another buyer, the agent loses 100% of house B. They are only selling so they can buy house A, otherwise they stay where they are. Anyway that’s only a secondary consideration & not much in the scheme of things.

Really I’m just wondering is there anything we haven’t thought about & the best way to go about this. How about capital gains tax? If person A is building a house, what’s the story with Principal Private Residence? He will be exempt selling house A? Then house B becomes his PPR, so again exempt selling that? Only after moving in to the newly built house that will become his PPR.

Anyone ever done or heard of a similar deal?

mickdw

Sounds completely nuts to me.
Whats the stamp duty figures like?

Any mortgages involved?

Claw Hammer

H8GHOTI wrote: »

He hasn’t found a buyer for house B. Person A doesn’t necessarily want to buy house B, only doing it to move the deal along. There is the benefit of not needing to rent somewhere for 6 months but if they got €490k straight that wouldn’t be much of a concern. If person A didn’t come up with this idea everything could fall through.

A & B went sale agreed about 10 weeks ago and person B is unable to buy house A because they haven’t sold their own house.

How long does A give them? If A takes the house off the market or looks for another buyer, the agent loses 100% of house B. They are only selling so they can buy house A, otherwise they stay where they are. Anyway that’s only a secondary consideration & not much in the scheme of things.

Really I’m just wondering is there anything we haven’t thought about & the best way to go about this. How about capital gains tax? If person A is building a house, what’s the story with Principal Private Residence? He will be exempt selling house A? Then house B becomes his PPR, so again exempt selling that? Only after moving in to the newly built house that will become his PPR.

Anyone ever done or heard of a similar deal?

I knew a man who let the purchaser in as a tenant. The purchaser stopped paying rent after 6 months and didn't close the sale for 3 years.

silver2020

On capital gains tax you have 12 months without incurring a liability. Then after that it on a relative scale, so it would be tiny if anything for year 2.

H8GHOTI

mickdw wrote: »

Sounds completely nuts to me.
Whats the stamp duty figures like?

It’s unusual yes. But the alternative is the sale collapses or drags on indefinitely. Person B doesn’t get the house they want. Person A is left without a buyer or waits months for sale to conclude.

1% Stamp Duty
So €4,900 on house A, which will need to be paid by person B on a normal sale regardless.
Around €3,000 or so on house B. This is an extra cost on person A.
This is why I’m thinking about PPR & CGT. The prices of both houses could be adjusted down to save on stamp duty but that could come back to bite person A if they sold house B for “profit” and had to pay CGT. I think they’ll be ok but need to clarify it.

H8GHOTI

[Deleted User] wrote: »

Any mortgages involved?

Person B has a difference of about €170k to make up. Not sure where that’s coming from. Would have to presume mortgage but not sure. You think their bank might cause problems?

H8GHOTI

Claw Hammer wrote: »

I knew a man who let the purchaser in as a tenant. The purchaser stopped paying rent after 6 months and didn't close the sale for 3 years.

Jez that sounds messy alright. Bit of a different situation though.

nine fine irishmen

Sounds to me like Person B is getting everything they want and Person A is taking on all the risk. They sell their house for what they think the value is rather than what the market is telling them and buy Person A's house which also what they want.
Then Person A is left with a house they won't want as soon as their new house is built. They then hope to sell Person B's house for what they paid for it and pay an estate agent and solicitor again.
Am I missing something?

H8GHOTI

^
Nope, I agree with you.
I’m hoping that person B & agent would be open to some negotiation because person A is taking this risk & helping them get this over the line. B could reduce price a bit or pay stamp duty. Agent could reduce commission, maybe with a promise that he gets the house to sell again next year. That’s what I’m trying to figure out. What would be fair for everyone.

While person A is taking risk, there are some benefits too. Their house does get sold now. It could take a while to find another buyer plus all the hassle of viewings etc.... The fees that need to be paid would be offset somewhat by the saving in rent and it would save them finding a suitable place while completing the new build.

Del2005

How much is person B willing to give on top of their house to person A? If their house isn't selling at €315k then it's most likely going to be worth less than that. So are they going to give €170k or €175k or €190k? Person A has to assume house B will sell for €300k or less so will need to be covered for that amount and for the deal they are giving person B.

killbillvol2

This sounds like the kind of daft idea that someone comes up with when they're having sleepless nights over a sale taking too long.

Person A should put the house hack on the market. There's no other intelligent option.

silver2020

Ah, read it wrong.

Person B sells their house to "A" for €320k,
Person B buys person A's house for €490k

Transactions conclude on the same day.

Person B taking no risk, no capital gains tax implications or anything. Effectively has sold their house to a 3rd party. Thta this 3rd party is the seller of B's new house is neither here nor there.

Person A only risk is whether they get the same money for person's B house that they paid for.

Person A would have the additional legal fees of buying and selling B's house and the agent fees for selling too.

They can drop this cost by agreeing a reduced fee from estate agent for a sale within 12 months. Similarly on the legal side as very little will change on the legal side in that 6-12 months.

I would say a €5,000 reduction in price f B's house should be acceptable.

nine fine irishmen

I would have thought that the estate agents, solicitors fees and stamp duty even if reduced could add up to 5K. Plus the hassle and cost of moving furniture, changing mailing address, energy and broadband providers etc.

I certainly wouldn't take that on but that may be because of a recent and traumatic house move ;-)