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?!

My goodness, what an odd (kindly intentioned though) thing to propose! Sounds like they aren't in need of a handout, and as tenants don't deserve a lower buying price any more than council house buyers do, as they have paid (low) rent, had maintenance taken care of, etc etc. He seems to be very attached to this house, but the £500k difference in what you could get on the market is too big to ignore! I would be pretty annoyed if my DH wanted to do this, and think this kind of thing is surely a joint decision?

@MargotBamborough

My mum was born in her grandparents 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.

And wanting to 'pop in' once a month to do the garden, and 'potter around.' I find that bit very strange. No landlord does that (that I know of.) The garden is the responsibility of the tenant.

Indeed, when me and DH moved out of a private let some 15 years ago (after being model tenants for 4 years,) we didn't mow the lawn for a month or so as we were busy moving into our new home. Everything in the garden was neat apart from that. And the grass was only a few inches high.

When we left she deducted half our £600 deposit for the garden being 'untidy.' I was fucking fuming as we had spent about £1000 on the house since we had been in it, putting up curtain poles, curtains, blinds, (as half the windows had none when we moved in!) putting carpet in the boxroom, (it had none, just a bare concrete floor) and we had wallpapered the other 2 bedrooms too. Also left a lovely ornamental tree in a large pot at the front. (Cost us about £125 when we got it and it was bigger and really blooming when we left..) We painted throughout as well as the place stunk of dogs and cigarettes!

When the property agent told us the landlady was taking half our deposit, fortunately we still had the keys as our tenancy was not up for another 3 days, so we went back to the house. We borrowed a van off someone and took the tree, and went into the house, and took all the blinds and curtains down, and all the curtain poles we had put up... 3 sets - and the carpet we had put down in the boxroom.

As I said, when we moved in there were no coverings on the windows and half the windows had no curtain rail or pole so we had to provide them ourselves. AND the boxroom had no carpet. We thought we would do the new tenants a good turn when they moved in as they would not have to have put anything up, or put a carpet down. But she soured our kindness, and we pulled everything down that we had put up. And took our tree. We only left it as we could not fit it in the removal van. So yeah we borrowed a van and got it.

The property agent said the landlady is 'disappointed' at what we did. What? Took our own stuff? LOL! I said 'I couldn't give a shit. I am pissed off at losing £300 for not mowing the lawn for 4 weeks.' Glad to get out of private let after that tbh!

I know we could have contested the deposit deduction with the Deposit Protection Scheme, but I didn't have the energy at the time. I was worn out from moving house, and some other stuff going on at the time.

I would have liked a kinder landlord/landlady, but not one that keeps visiting and pottering around in the garden!

Look at it as suddenly giving £500000 to charity. Would you do that? In fact this is much worse than giving £500,000 to charity because a charity will make the money go further and literally save lives with it. All this donation would achieve is making thier kids’ eventual inheritance bigger

Your DH might just be generous OR his ego might be attracted to the idea of himself as a ‘Mr Big’.

Say NO. Agree a better way to give to charity.

Also, do people really think the OP's husband is romantically interested in the young woman? Surely not! Why are peoples minds coming up with this? All I read (from the OP) is that she reminds him of his mother.

your DH is being an idiot

I think its a lovely idea to pay forward his own good fortune in receiving a 'free' house. So few people think this way and it's so nice to hear of someone who does.
That said, his kindness is somewhat misdirected as the tenants are clearly incredibly priveleged already, and he could make a huge difference if he channelled his generosity to people in greater need. However, he has his reasons to want to benefit this couple. You won't go without as a result, so I think it would be a shame to stand in the way of his kindness to others when you and your family have already benefitted hugely from his parents money.

There is every possibility of the OP's own family going without as a result, especially if either of them needs care in the future.

No, most young couples sell up and move on because they are looking for somewhere larger with a garden, maybe to start a family. This couple would have absolutely no need to sell up and move on if they already have a 5 bed with garden.

Wow. I understand helping people out, but this couple don't need it. They have fantastic careers -backgrounds are just not relevant now.

I can't believe someone would give half a million quid to two people who actually don't need it. It would take me 3 years to earn the salary this young woman who reminds your husband of his mother started on!

Does he really think he'll still be able to potter in the garden when they own the house, when they have children?

Depends entirely on circumstances.

They might have a lot of DC. One of them might become disabled and need an adapted property and/or space for live in carers, or they could have a DC that does. These things happen all the time. It simply isn't the case that a decent sized house automatically covers any housing need a young couple might have throughout their lifetime.

I suspect he expects to continue to visit he needs to be very careful about this as this may be viewed as a reservation of benefit for IHT purposes. Also if the tenant really is a 'magic circle' lawyer they are highly likely to have the purchase sewn up legally so that he will have no rights post sale.

I don't know all the details but you could look into how it would work to sell them a share of the ownership of the house.

for the sake of argument a 50% share for 750k they can then continue to pay some rent on the other half to allow you to pay off your daughters mortgage, have a little bit of cash for yourselves and have an ongoing income through your retirement.

Nobody in their right mind would do this given the circumstances, as either the buyers or the sellers.

To do anything other than to sell the house at full market value and cut all ties to it would be absolutely insane.

To buy a house that has some weird attachment to the former owners would be equally insane.

First things first, get a current valuation on the property so you all know what figures you are talking about.

It sounds mad to slash the property price by one third, however you need to know exact figures and then you can work out just how mad it may or may not be.

I know zero about this area: could a stipulation be put into the contract that if they sold within x years that the rest of the current market value at time of their purchase would be given to yourselves (eg you sell for £1mil and it is worth 200k more so when they sell they owe you £200k..)? Is that a thing?

If you and your DH are joint tenants or tenants in common, one of you can sell this couple your share in the property. If you are joint tenants, DH can sell his 50% share to the couple. They then continue to pay you 1/2 the usual rent for your 50% that you still own as well as the mortgage on the 50% share your DH has sold them.

Say the house is worth the 1.5m you estimate, this means they would buy 50% of the house for £750k. Which it sounds like they can afford and I think they’d consider this as it means they can stay in the house and are on a path to perhaps being able to buy all of it for fair market value.

This would mean you can pay off your daughters mortgage and you’d continue to have lovely tenants who you wouldn’t want to evict so it doesn’t matter that you lose this right by making them tenants in common with you.

After a suitable time, you can then sell your share to them at what it will currently be worth. Perhaps after you are sure they will not be taking advantage of you both.

It’s not risk free but worth thinking about and getting legal advice.

@MrsLyndi for 300,000 (I'm undercutting them) I'm willing to put on a wig and play the part of "mother"

Your DH is a rare sort of person in that he sees the chance to spread his good fortune around and doesn’t ignore it in favour of making more money. Wow.

There might be a way for him to do what he wants to do that doesn’t involve giving this couple a half a million pound gift.

They take a mortgage now for what they can afford, let’s say £1m. They grant your husband a standard security over the shortfall from the valuation as it stands at the moment. So if the property is worth £1.5m at the date of agreement and they do sell it for £1.8m in two years, your DH’s SS would be discharged and the first £500k of profit would be repaid to him or, in the event of his death in the interim, to his beneficiaries.

Hypothetically, if they sell it in twenty years, at which point the property has doubled in value, they’d get the whole profit less half a million pounds, which would again be paid to DH/ his beneficiaries. This isn’t a great investment for DH but it’s better than his current plan, right? I suppose you could factor some sort of further profit share into any agreement. A bank would get interest, not a lump-sum share of free proceeds, which may put them off, but it’s still not a bad deal for them since a bank won’t lend them enough to hang onto that house right now.

If their income increases enough in the next few years to remortgage the house for £1.5m, which sounds feasible given their employment status, they can then discharge the standard security and pay back your husband/his estate.

Essentially, a half million pound loan. He could charge interest if he wished. They’d also have to really trust him/you/ your estate not to have a change of heart and call up the loan as well. I might be wary about that.

Clearly some people think this whole thing is ludicrous. Personally, I can see where he’s coming from, they’ve been excellent custodians of a property that’s meant a lot to his family. If they turn out to be in it for the money, then his loss is prevented.

There will be IHT and CGT issues, which could well lead to greater liability for his estate depending on when the money bounces back, you’d need to take specialist advice on that. I suspect if you’re sufficiently well off to be talking in terms of half a million pound gifts, you’ll have to think about specialist estate planning sometime soon anyway.
Perhaps the young couple could pay your fees if you decide to proceed. I wonder if you could even use this to lessen your IHT liability but also wonder if CGT will make this unworkable. Need loads more information which understandably you ain’t going to be handing out online.

You’ve got reservations about your DH’s emotional state, you may very well be right, but perhaps a halfway measure might interest him. It might even put him off the whole notion😬

You said this more succinctly than me.

OP’s DH has no idea what the half a million could be needed for in the future, care home fees or otherwise. This young couple are being very canny especially the rough childhood and care home being talked about and designed to play on DH heartstrings.

OP you haven't addressed the capital gains tax issue at all. Is your DH aware that he will pay capital gains tax when the property is sold?

Gifting 500k worth of house to a magic circle lawyer is insane. Newly qualified lawyers at these firms can be on £125k, with salary increases every year. She could well be on £200-300k

https://www.lawcareers.net/Explore/News/Magic-circle-law-firms-continue-newly-qualified-salary-war-05052023

Also, if the house is as you describe and they want to have children, realistically it is not going to be their house for life. Especially if they are gifted equity of 500k. They will very likely want to buy a larger place (in terms of footprint, if not bedrooms) and that amount of money will enable them to do so, essentially immediately after they buy. How is your husband going to feel if they immediately sell? Or sell in a few years?

I think he needs to think about why he wants to do this. Is it to keep a link to the house or a link to them? Either way, it doesn't seem likely that it will have that affect, and actually it could destroy the relationship if they do go on to sell the house.

Ok a newly qualified at Slaughter and May (magic circle law firm ) first year is on £115000 , if he is say in banking his salary could easily be north of that, accountancy slightly south . Your husband sounds like he has an emotional crush on this girl which is absolutely not her fault but is unhelpful and shes clearly a sharp cookie so would probably not be interested in some sort of shared ownership deal etc because they can afford a property without this help.An outright discount may be different but assuming they are completely unaware of how your dh is thinking they probably would be shocked and possibly uncomfortable, we can all be tempted though.

On those types of careers they will sell on and as a pp poster mentioned likely move to more fashionable areas

Because their budget is £1m. They're not struggling to get their foot on the ladder.

I think this is a beautiful and kind thing your partner is thinking of doing but unfortunately will lead to so much pain for him when they up and sell which they probably will with half a mil profit

I wonder how easy it is to sell a house way under value

Very easy. You can sell your own property for whatever price you choose. It’s a crazy idea though.

Going against the tide.
count up the “ on costs “ of selling that you won’t pay by doing it like this , think about falling prices. Think about a no stress sale. ( presumably )

then think about the issues of getting new tenants when they move out ( could be horrendous ) and possible house price crash. Redecorating , new kitchen / bathroom may even be needed given the length of time it’s been rented.

set the two against each other

having recently sold a probate house in London I’d be tempted to sell tbh