Unusual house offer - any thoughts please?

[UnusualOffer]

My partner has had an unusual offer on his house. He isn't on MN so I'm looking for perspectives/ideas/experiences on his behalf. His estate agent hasn't come across this kind of offer before.

The prospective buyers are on the market (recently I think) and priced to sell. They are downsizing but haven't sold. They're offering 5K under the asking price (an offer he'd accept) but want to pay him £500 per month to take his house off the market. The £500 would come off the house price on completion but is his to keep if they pulled out of the sale.

Yhere are benefits and pitfalls we can see but it would be great to get other perspectives.

Don't do it.

It could take the buyers months to sell, they could find something else they prefer, the market could nosedive further. He may lose out on another buyer. All feels too uncertain.

I don’t see any benefit to your partner BTW unless he can keep the money if the others pull out or if he needs to pull out. You’d need to get lawyers involved to draft T&Cs. Is the hassle worth it? What if it takes a year to complete?

My first thought is the income tax implication. Assuming the sale eventually goes through, the difference between the income tax he'll have paid on the £500/month (I'm assuming he's an honest person and declares it) means he's worse off than if they paid the full amount as part of the property sale (which isn't liable for income tax - and even if he has to pay capital gains, this is still less than income tax). Worse case the additional income could push him into the next tax band and impact him significantly (obviously depends on his current income).

This is fraught with problems, OP.

They want to incentivise him to wait for them.

1: £500 per month is not a big enough sum in terms of house values. £5k a month might be worth the headaches!
2: the conditions would need to be drawn up and are complicated. What happens if he decides to no longer sell?

1. How does he 'give notice' on the agreement if it goes on too long?

Doesn't sound appealing to me

@HundredMilesAnHour you make very good points re tax.

Nope. On the face of it it sounds appealing. A no strings £500 a month. But it’s far too uncertain. I’ve never heard of it.

If they had any confidence that their property would sell relatively quickly, they wouldn’t even be offering. My gut feeling is that they think their property will take a while to sell. He could end up still in the house in a year. They could eventually be in a position to proceed in several months and then ask for a reduction or find faults and try to reduce the price.

I don’t know the tax implications but I think it’s a recipe for disaster.

Way way too much hassle and probably legally complicated meaning the legal advice for the agreement will be costly. This could drag on forever and presumably he wants to move for a reason.

They aren't proceedable at the moment and need to put their money and efforts into selling the house.

And I say that as someone buying at the moment who is probably going to miss out on the one suitable property for us as we negotiate selling ours

Thanks - these are good points, especially about tax. He would definitely declare it.
Thanks again.

So it's his to keep if THEY pulled out.
But not his to keep if HE pulls out.
So if they take ages to sell and he wants to pull out, the longer he hangs on hoping, the more he has to pay them back?
Nah. Don't like it. 😒

Agree with others I don’t see the benefit to your husband

I suspect their intentions are good (i.e. trying not to lose the property they want to buy despite not being in a position to proceed) but they're rather naive and haven't thought it through. Although offering anything less than full ask in their position is a mickey-take.

The question is does your DP want to negotiate with them? Or just say no thanks, come back when you're able to proceed if my property is still on the market?

This is a mess for many reasons. Firstly it suggests to me they are desperate and already know they might struggle to sell therefore offering you an offer they'll think is too good to be true. Secondly the mortgage company will want to know how they are affording the mortgage, as a buyer you clearly need to show where all the money is coming from. If they want these payments to come off the final total of the house how can they explain this weird arrangement? It would be a nightmare in paper work for the solicitors also. I would just either accept the offer or reject it as you would normally. I don't think money should cross hands prior to completion. How could you record how much to know the house sale down by? Could they start to lie and say they'd given you more??? So many issues op

What happens if they take 6 months to find a buyer? 12 months? At what point can you withdraw without penalty?
Along with all the income and tax issues.
£500 a month, no reduction on price, might be more tempting.

This is a legal quagmire.

The answer has to be no, as they are taking it off rhe end price. So all they are doing is keeping him hanging, potentially for months and months, and then at rhe end the amount they give him is taken off the final price.

it’s a shit offer.

I've very little experience in these things vs. other posters but my gut instinct says "no". 500 is a tiny sum compared to the potential loss in value of a house if the market continues to fall. Perhaps you could offer to let them know if there's been another offer to give them a chance to also make an offer as a good will gesture, but I don't know if this is done/advisable either?

Unless you have got a solicitor that can put their suggested terms into a watertight contract, then its pointless going ahead. Speak to your solicitor and get their view on how the £500/month woukd be treated. Is it a deposit, in which case its not earned income but part of the house price and not taxable (unless its a second home being sold). If its not a deposit then what is the payment for in a legal sense? What would happen contractually to those payments if the seller wanted to pull out? How long will the buyers make these payments for? Do they stop on exchange of contracts or completion? Would the payments give the buyers any kind of partial ownership rights before exchange of contracts?

We had someone ask 1k from us to take the house of the market but the estate agent were dead against the idea and said it's just something you don't do. We said no and she refused I accept our offer until we backed out. She did this with all the potential buyers and in the end didn't sell it for what she wanted and had to go through auction for thousands less, only because she wanted a grand up front. Don't do it.

In your partner's shoes I'd say no, thank you. Tell them that if the house is still being marketed when they have found a buyer then you'd be happy to proceed. In the meantime you'll inform them of any other offers.

What they are suggesting isn't workable and with the volatility in the market at the moment you need to find buyers who can proceed.

Best of luck!

@Wardrobemalfunction22 Surely the solicitor's fees alone would wipe out any potential financial benefit?

@tulips27 yes probably! Another reason not to go down this path at all, its just too weird and unusual

And he's a higher rate taxpayer so there's even less benefit to him if they pull out.

They’re not in a strong negotiating position. If they want it that badly they should offer above or at the asking price and ask for the house to be taken off the market for a month while they find a buyer. Everyone always thinks their property is ‘priced to sell’!

No way should he accept this. They aren't in a position to buy as they havdn't sold their own house.,