DH wants to sell house significantly below market value

[MrsLyndi]

My DH and I are 59 and 61 respectively. We have one child, she is 29.
My DHs parents passed away 10 or so years ago. About 10 years before this they gifted us their 5 bedroom house in a lovely part of London. They wanted to move back to where they had grown up having inherited his mother’s aunts home, but weren’t ready to see the house go as they raised DH and his late sister there.
DH has been renting the house out ever since, it’s been a nice earner for us as it is mortgage free. We live in rurally a few hours from London and had no intention of moving back so it made the most sense.

About 8/9 years ago we took a risk and allowed some fresh uni grads to move in. They made an impression at the time and we haven’t regretted it. They were lovely tenants. They slowly started moving out and now it’s one of the originals and his fiancé.
They are 27/30, incredibly good tenants (the house is gorgeous, we’ve allowed them to decorate as they wish. They are never late with rent, and just lovely people.
DH goes down to London once a month, he likes to sort the garden out himself and enjoys seeing the couple. He has gotten to know them. They are both from the north, one of them had a rough childhood, was in the care system etc. They are now both very successful, make good money etc.
DH was down at the weekend to do a last clear of the garden before winter. As per he got chatting to the couple, they gave an invite for their wedding next year. They also mentioned that they are starting to look at buying somewhere, joked they wish they could afford the house but it would be way out of budget etc. (We’ve been charging below market rate rent for a while now as we don’t need the income, and they are hassle free tenants who let DH potter in the garden).
They told DH they wouldn’t be looking at more than 1mil or so.
The house is probably worth about 1.5mil now potentially a little more(5 bedrooms, good sized garden, drive way, well decorated, in the catchment area for a fantastic primary, near one of Londons big parks and good transport links!).
DH has been thinking of selling the house for a few years and decided when they eventually moved out that he would sell it. He wants to give our daughter a gift that will pay off her mortgage (less than £500,000). Then use the rest of the money to enjoy our retirement. We have good pensions so that is not a concern.
Now DH has a crazy idea … he wants to sell them the house for what they can afford, around the £950,000-1mil mark, so significantly less than what it is worth!!!

His reasonings are

• The girl reminds him of his mother, he’s always said this. Very cheery, fun person
• One of them has overcome all sorts to get to where they are
• He knows they will look after the house, they are planning to have a family etc.
• “It feels like the right thing to do”

In DHs mind, we don’t need the money, even selling for significantly less, we can take care of our daughter and have a nice retirement.

I’m more on the fence. While they seem like lovely people, what if in 5 years they sell and run off with the £500,000+ profit. How does this work with a mortgage and such? We don’t know them all that well but would be essentially giving them half a million pounds!!!!
DH is a very kind and loving man but often too kind!
AIBU to think this is a crazy idea and wonder how it’s even possible?!

Can I just point out that the point is being made repeatedly that "they might sell up 😮!" Well, of course they will eventually. That is natural for a young couple or family; it would be more surprising if they didn't move house. And it would be their asset to sell, what's difficult to understand about that? When you sell a house you lose the emotional claim on it.

A Magic Circle lawyer is someone who works for one of the following law firms:

Allen and Overy
Clifford Chance
Freshfields
Linklaters
Slaughter and May

and here is what they earn:

https://www.rollonfriday.com/inside-info

It sounds like this woman is a qualified lawyer, not a trainee.

@TotalOverhaul

when they started renting they were fresh uni grads! And reduced rents were because they were all good tenants.
also if you read the first post they came from the north and not from rich families and one from disadvantaged background and care system

My grandparents' house was bought by a young couple who wanted to start a family. They paid the full price for it, although admittedly they had no connection to it beforehand as they weren't tenants.

My mum was born in that house and had a strong emotional connection to it. She and the people who bought it are friends on Facebook and like each other's photos from time to time. That seems like a slightly more normal way of keeping a link to your childhood home if you ask me, rather than gifting some near strangers half a million pounds.

Magic circle lawyers (Freshfields, slaughter and may, Allen and overy, Clifford chance, linklaters) start at salaries of over £100k for a Newly Qualified lawyer.

She is now more than 4 years qualified. With bonus, she will be on £150k+ per year. Most people leave MC for quality of life reasons - your husband would almost certainly be paying for her to work less hard or give up work to have kids. They can almost certainly afford £1.5m if they are careful with cash at this point. If it were me, I'd probably flip the house and reduce a mortgage and move out when I had a family - your DH probably wouldn't have a reason to keep more than very limited contact if they did this, so it would be giving money away that could have gone to your daughter or been used elsewhere.

They still don't need the OP and her husband's charity though.

If her husband really wants to do a good thing he could give a six figure sum to a charity helping disadvantaged young people and the charity could reclaim gift aid on it.

@MargotBamborough

yes they don’t need it now.
but this poster was aghast they benefited from low rent over the years

Does your husband realise he will have to pay capital gains tax if he sells it as your non residential home. Not only that it would be on the gain of the difference between value when he was given it and the actual market value not the sale price. He may not get as much cash out as he expects if he gives them such a chunk of equity!

Hmm. If it's nearer to 1.1 million is plan is actually pretty sound because it's less likely to fall through and cause you grief and you'll save on estate agent fees.
Don't underestimate the effect the good school district will have had on the value of the other one.

They will also be saving moving fees etc so maybe try and meet them in the middle at 1.05?

@MrsLyndi let's look at it from another point of view. no decent person would accept that proposition and effectively cheat a family of 500k (probably a lot more actually)! knowing someone like this, completely fine to knock a few k off, but not so much! and anyone who accepts this, you have to question their integrity!

@MargotBamborough So even if you had the power to stop your husband doing his own family out of half a million quid, you wouldn't??”

No, because it was his parent’s asset, not mine.
He wouldn’t do what OP’s husband is proposing anyway so easy for me to say. But I wouldn’t dictate. He wouldn’t the other way around. But then I wouldn’t be that daft, either.

Your husband might be telling himself that he's a kind, generous person. But his responsibility is to his wife and daughter, not some woman he has a weird crush on.

I suspect this couple know your husband has a strange obsession with her and they are trying to use that to take advantage.

As one of the people who's said this, the inevitability of them selling sooner or later is exactly the point. If DH is attached to the idea of people he likes living in this house and being able to go and visit whenever, selling it is not a good plan. What you are saying here is the reason why people are pointing it out.

And if your husband had to pay CGT on the part of the property's value he didn't actually get paid by the buyers?

Or if he died within 7 years and it formed part of his estate for inheritance tax purposes?

Or if one or both of you needed care and you ran out of money to pay for it and the council said, "Sorry we can't help, you gave away half a million pounds" and your daughter had to mortgage her house again to help you out?

None of that would be any of your business because it was your husband's asset to do what he liked with?

People saying that the OP should donate a six-figure sum to charity, how on earth do you think this is logical unless she is some kind of multi-millionaire already? Just because someone leans on you to give them half a million, it doesn't follow that you then are somehow obliged to give that half a million to charity. If it did, every time someone was threatened with being mugged, you would be morally bound over to donate that amount to charity. Just a bizarre kind of logic.

Some people here are not used to talking about or having large sums of money and frankly it shows. It's easy to be flippant about six figures of someone else's money, isn't it? I doubt any of the posters with a background in law or accounting are advocating for that.

I’m more on the fence. While they seem like lovely people, what if in 5 years they sell and run off with the £500,000+ profit. How does this work with a mortgage and such? We don’t know them all that well but would be essentially giving them half a million pounds!!!!

Exactly - and at some point they WILL sell it and make that profit - whether it's in five years or ten or more. They are going to get a massive windfall from your DH's generosity. TBH, I think he's a fool and a fool and his money are soon parted.

Although the housing stock and transport links are good, East Greenwich (vs Greenwich proper near the park) is not the kind of area that a very high income family would generally see as their forever home. Don’t get me wrong, I would happily live there but I am not in the income bracket of a magic circle lawyer. The tenants are far more likely to move to Blackheath or Dulwich or Clapham for the schools, certainly within the next decade. Even those with lovely homes right on the park often move as the commute to the best independent schools from Greenwich is a pain. Your DH will lose his connection to that house within a few years even if he sells to the tenants.

I don't think people are seriously suggesting he gives the same amount to charity.

It's more that if you look at it in those terms, i.e. giving a substantial amount of money to somebody else for their benefit and not yours, in return for warm fuzzy feelings that you have helped someone, would you do it? Probably not, no. It's hardly the equivalent of donating 100 quid to Shelter at Christmas, is it?

Dumb question alert...

Are private mortgages still a thing?

My parents bought their first house via a private arrangement with the homeowner. In my mum's case, it was all arranged informally/verbally. When the homeowner passed away she found out he had requested she be gifted the rest of the house.

If you could arrange it properly via a solicitor and legal contract then DH could offer them a mortgage for 1.5m with repayments they can afford and perhaps in the future, once they have some equity they could remortgage with a bank and pay the remaining what you are owed.

They have given you a lot of money over the years
I think it would be the right thing to do

But I understand that is not the modern way of thinking and getting more money may be higher on your list than helping this young couple out

No, the OP and her husband have given this couple a lot of money over the years by letting them live in the house for reduced rent!

I would do things properly. Get it valued by three local estate agents. Print out the three valuations. Next time your DH goes round, take the valuations with him and have a frank chat with them. He can say ‘if you were serious about buying the house, I’d love you to have it. I have a huge fondness for the house and I know you’d look after it, you’re a great couple and you’ve overcome a lot. But I’ve got my own family and future to think about too. The estate agent thinks we could get 1.2 million for it. If you could get to anywhere over 1,000,000 I’d be happy to chat seriously about doing a deal.

Letting them have it 500k cheaper sounds a bit OTT. But letting them have it for 150k cheaper is a lovely, generous thing to do. I think your DH sounds lovely BTW.

They work in the city, they don't need 150k of loveliness! What an absolute joke. I hope you don't advise anyone as a part of your job.

I have not read the whole thread so this may have already been said. But be careful from a 'deprivation of assets' point of view, particularly if you are older (which seems to be what you are saying) and may, at some point, require a care home. The local authority is allowed to go as far back as it deems fit into your accounts - if you have a) given a huge sum away to one of your children and b) deprived yourself of another £500k just because you can, you may well run into problems. Or more importantly, whoever is caring for you - presumably your daughter - may run into problems. Essentially, they can say they will not pay anything until £1 million (or however much they consider you have deprived yourself of) has been spent on your care.

You don't sound like money is an issue for you as a family. But do 'worst case scenario' plan before doing anything and seek legal advice so you know you are doing the right thing for your family longer term.

Can you ask DH what he thinks the time after the sale, if it were to happen, will look like??

I suspect he expects to continue to visit, and to possibly have an even closer friendship. Ask him if he would be as willing to sell the house so cheaply if that doesn’t happen. Remind him he would have no control over that.

Then do the sums. Work out the CGT. Than how much is left. And discuss your DDs feelings. In her shoes I would have no issue with a 500k donation to charities that I knew my parents were passionate about. But I would be extremely hurt by the same payment to my parents tenants who had already been receiving a great deal for many years. Can he see how from some perspectives what he is suggesting could be seen as very selfish and self absorbed??