[Closed] Pitfalls of selling property to someone you know

Yeah. When I left the UK I sold my place to a friend from work. Because he was a friend, I was more honest with him than I would have been to another random person, so he knew all the minor problems that I never got round to fixing. I could probably have got a bit more selling to someone I did not know, but he and his wife wanted it and they were fair so I saw no reason not to sell to them.

For sure use a solicitor to get the contracts done. It makes things a lot easier, even if it does cost money.

Can't see any issues. You can save a lot of fees if you are friendly. I've bought from someone I know when he was reducing his BTL portfolio. It was low value commercial property so already easy but we sorted out the paperwork between us. Went to the land registry office together; they took the forms, a copy of our passports and about £40 and it was done. No other fees at all. If you are selling there is very little to check, all you really care about is getting the money, I handed over a banker's draft in the registry office once the form was signed. All the conveyancing issues are for the buyer and if he already owns neighbouring properties most of that will be irrelevant.

Ohhh really so we can avoid a heck of a lot of costs then really! I'd assumed legally we'd have to do some surveys but then did wonder about the fact he would know any issues. The two are very friendly and always helping each other out with stuff.

I’d assumed legally we’d have to do some surveys

No legal requirement at all. There are complications if the buyer needs a mortgage, they will probably insist on a survey, but if paying cash you can do what you like. I'd check it was all up to date on the land registry. You can download the current plan and title for £4

only ever sold my houses privately to people I know - not tried to make it that way, just happened. I will point out that neither was a friend - just people I knew. And it was good that way as there was always a 'discussion' about something!

Don't use a bargain basement conveyancing service - that'll take forever, and in my experience, will lose some bits of paperwork...

If you are selling a private lived in house then the sale price is not that important, as there is no tax due on the sale.

The problem for private transactions is where cgt is due, the seller cannot just transfer it to a family member, well he can, but the disposal from his estate is taxed at market value.

In this case as long as the price is cerca market related less agent fees, HMRC aren't going to be that interested. Just keep evidence in case of investigation, the buyers going to save a bit of stamp duty too.

Sounds like he is motivated to buy the house for whatever reason, seemingly to make money if he has bought other houses, so why would you sell it under value, albeit slightly. Using an agent may introduce competition (if the house is good) so may well cover its own costs. Failing that, get a valuation from an agent and offer it to him at price + £x

When I sold my first flat the developer I had bought it off expressed an interest in buying it back to rent out. We agreed to get three independent valuations done. When he saw the numbers he quickly lost interest!

I can only imagine the whole problem of clashed personalities.

Keep it, simple and business like, a lot of people aren't always good at accepting the value of something, frankly it'll go to rat-shit the first time someone utters the words "all day long" ha ha.

Personally, I'd get it independently valued, work out how much, if any you're willing to discount to save the hassle / fees and name your price, maybe with a bit of wiggle room for negotiation, but if the buyers thinks he's going to get it for a knock down price because it's easy or whatever or your PH thinks he'll squeeze every penny out of it, because he must really want it, it'll just turn into a nightmare.

I'm assuming cgt is capitol gains tax, however, I'm going to do what I do at work when people continually use acronyms that may not be the same across the board (ftp isn't function threshold power its failure to practice at work) and say do you mean crocodiles get treats?

I've had a very similar conversation this morning.

My dad went into a care home about 18 months ago and we rented his house out. Dad died last month so now it's time to sell. The tenants, who originally had a 12 month only lease, expiring in January have told our agent that they love the house and in June, when their accountant says they will be in a position to get a sufficient mortgage (no, I don't understand either) they will pay the market price. Our letting agent is also an estate agent so would like this all to happen smoothly.
I spoke to another estate agent today, who I know and trust (this is Stafford, OK, where things tend to work as they should!) who said - bad idea! We might get to June and they don't have the money to pay the going rate. It's in an area that's very desirable and if there's a bidding war we might end up with a lot more than expected.
Moral: Never let emotions get involved when it comes to property. I'm going to tell everybody (untruthfully-ish) that the decision is out of my hands and the other executors/beneficiaries have chosen to play hardball.
Edit: so when GolfChick mentions her OH, I'm assuming it's an Orange Hardtail.

Yeahh I've already said to my OH that if he tries to negotiate for 'a bargain' that we won't bother. Have already checked nearby sale prices for same sized property so know the rough value. Could do with working out what the fee's will save so we have a realistic price.

Pretty much what nickjb said above. The transfer of ownership documentation is incredibly straightforward for and half decent conveyancing solicitor. The thing that makes the legal process of property sales so convoluted is messing about trying to collate and understand information from all over the place relating to search queries.
If you get on with the potential purchaser agree to engage one solicitor together so that you can all be in a position to sign everything on the spot.
Personally, I would go for the top end of your intended sale price as the person in question clearly needs the property and almost certainly intends to make money out of the purchase.

I would work out why they want to sell it, and then look up the concept of a ransom strip if you think it's for him to knock them all down and develop it.

If not, get a valuation from a few agents, and offer it for that. You'll save the agent fee.

Yes cgt is capital gains tax, a family member offered me their house at a bargain price, I was tempted but looked into it. It was below market value so i would have paid less stamp duty, the vendor a disposal from her estate free of tax.

Any deals done where tax is saved you have to substantiate the price, like 3 market valuations, or an explanation. HMRC can easily look at house sale data, also I m pretty sure solicitors have a duty to dob you in it if they suspect something.

I would try and keep it if someone else wants it, maybe he can see the value in it that you can't, or it's a good rental proposition.

If he is desperate to buy then that should add a premium

Get three estate agents to value and give you their fee's

Add 10% on to the net and that's your proposal to the buyer

If he doesn't like it tell him it's going on Rightmove at valuation plus 10%

You can always accept less, it's hard to drive the number up.

My wife's sister bought her out of a house they jointly owned, and there has always been a little bitterness about the price (but of course that's not going to be an issue with neighbour).

I think they got 3 estate agent valuations and took the middle one but you never know the actual price it would reach on open market. Estate agents who go in with very high prices generally then encourage you to take offers.

And your only saving is estate agents fees - and they're not actually that much. On a 500k property at 2% fees it's still only 10k (and you can usually negotiate lower than that). But you could lose way more than £10k if you had a couple of people actually interested.

Against that, you've got a buyer now, with no hassle and you're pretty certain he's going to complete and pay up so you can get on with moving and finding somewhere else.

I did a private sale when buying my house, we split the difference on the EA's selling fees, but other than that it was sold at market rate.

My OH reckons his plan is to raise the level at the bottom of all the gardens as they're quite long and add in a few extra properties. Definitely not something we want to do so he can crack on if he wants to. We just want to leave Kidderminster!

My OH reckons his plan is to raise the level at the bottom of all the gardens as they’re quite long and add in a few extra properties. Definitely not something we want to do so he can crack on if he wants to. We just want to leave Kidderminster!

Add 20% as it has development potential

Well, it's something I did ok out of buying my first house from a colleague nearly 20 years ago. Agreed a price in October. Meantime, the housing market went nuts overnight. Come May when he was ready to sell, he said "things have changed and I want more money". Ok, I was expecting him to ask for £20k extra and he stuck a mere £1.5k on. Can't to this day work out why. So I think as above, wait til you sell to agree the market price (unless you want to bet on a price crash).

Not uncommon to have a develoment clause in the sale contract, whereby if the owner redevelops the land, he has to make an additional payment.

Even an STW thread on it
https://singletrackmag.com/forum/topic/house-selling-future-development-clauses-do-you-agree/

Getting out of Kidderminster is always a good plan

I don’t see that there’s room myself and frankly if he makes a tonne of money out of it I don’t think we’d care because we’d have moved on to a whole different county and have bigger things to look at and worry about. He’ll be waiting a while to buy the next house along but I think everyone is right that if he wants it maybe we shouldn’t be going too low and literally ask for the market price.

but I think everyone is right that if he wants it maybe we shouldn’t be going too low

Your price can always come down, getting it to go up is very difficult. Start high, work down.

If you get on with the potential purchaser agree to engage one solicitor together so that you can all be in a position to sign everything on the spot.

I’d be surprised if any good solicitor was willing to act for both parties - there’s a conflict of interest. The law society would likely be raising eyebrows.

Given the size of the transaction doing it without legal advice is probably not that wise. It’s not like this is an in-family transaction it’s a neighbour with a property empire and a guy who thinks the neighbour is doing him a favour by saving £600 on solicitors fees!

I’d agree with others if this is part of a grand plan this is worth MORE to the neighbour than joe bloggs. So personally I’d be saying we’ll put it on the market and he can offer/bid like anyone else; I might give him the heads up to let him come back to me with an amazing early offer...

I think the neighbour is a massive Beatles fan and wants to recreate the scene from the movie "Help!" where the four floppy-haired lads each go through their own front door on a Liverpool terraced street into one massive open-plan house.

I sold my first house on the work message board. No agent involved but solicitor for each side and everything else as normal.

Without an agent you are reliant on your own judgement re what to sell it for. For me it was a terrace house surrounded by similar ones and with various on the market so its not rocket science to see what they are worth.

Tried to be kind and sell to neighbour looking to upsize giving slightly under market price, in addition to taking off agency fees.

They had trouble with their chain, then their mortgage, somehow it was my fault and I had to become a therapist. Got fed up and put it on open market after waiting many months. Wouldn’t have been nice if an actual friend pulling away to move on with my own life.

sort of related to this, does anyone know the ins and outs of gifting a house to a child? MIL might gift house to SIL so they all live together, and SIL can get Mortgage to covert/extend house?

sort of related to this, does anyone know the ins and outs of gifting a house to a child? MIL might gift house to SIL so they all live together, and SIL can get Mortgage to covert/extend house?

Stamp duty would still be payable if there is any due & may fall into inheritance tax (again if due) if mil were to pass away within 7yrs of gifting House.