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?!

@MargotBamborough I don't think I ever said that OP wasn't entitled to have a say in it. I was simply arguing for the husband's perspective which I think is reasonable. I'm aware that I'm in the minority, but it currently stands at 79% to 21%, so it's not a tiny minority. I am entitled to my point of view which is different to yours and frankly I think it's ridiculous to suggest that you feel OP's husband might have dementia. Just because you cannot relate to his opinion or what he wants to do, doesn't mean it is objectively wrong.

I'm not saying the OP's husband has dementia, I'm saying that if my dad did this our first move would be to get him seen by a doctor because it would be a strong indication that he was no longer capable of making sensible financial decisions.

This is not a sensible financial decision for all the reasons people have outlined in this thread. There is nothing reasonable about wanting to act to your own and your family's considerable financial detriment for the benefit of someone you barely know who reminds you of your dead mother. It's absolutely bonkers.

... in your opinion.

Agree.

This decision may be generous, it may be emotional or kind, , but it could never ever be described as sensible and maybe thats ok we are all allowed some mad moments. But this mad moment could have significant implications not just for the OP and her DH but also their daughter and the tenants involved.

My guess is that the tenant was just being polite, she is probably well aware of the ops dh'd feelings towards her . She is probably fond of them but they are high flyers who will have their sights set on bigger and better things and will also be aware, as a lawyer, of the pitfalls of these types of transactions. If she has any sense she will say thank you very graciously and run a mile .

He can sell it at a reduced price but put a restriction on the title so that if they sell within 5/10/15/20 years making a significant profit he gets 50% of the uplift, it’s called an overage or he takes a charge against the property for the difference and they pay him back on a resale. Speak to a solicitor. What a lovely man he must be to want to help these people, doesn’t mean he needs to be a doormat though.

If they can afford a 1 million pound house they are already lucky financially and don't need a massive discount on a house. You are comfortably well off now but you never know what the future may bring. I wouldn't give away half a million.

@MrsLyndi
Once it's in different ownership, they can sell it the next day if they wish.
Why not sell it for what it's worth and give your daughter significantly more and perhaps a large charity donation?
On the other hand, it was his inheritance and I suppose he can do whatever he likes with it.

PLEASE READ: Have you thought about the tax implications. You are selling what it effectively a second property and not one you live in - therefore you will be taxed on any gain from when your husband inherited it and will be subject to capital gains tax of 28% on the increase in value since you have owned it. I would expect such a house to have gone up in value by about 500k since you inherited it - therefore you could be looking at a tax bill of £140k or more - so you're net value could be £1.36MM and not £1.5MM - less if it has gone up more in value. You have two options - sell at full market price - and pay the tax or extract 500k to give to your daughter and run it as a buy to let with a mortgage on it - that way you keep the property and re-let at full market rate. Even if it doesn't make a profit - it doesn't seem like you need the money. I'd never sell a house such as you describe - as you'll never get it back again and while you and your daughter do not want to live in London - maybe your grand children would who knows. Either way - you get to keep an asset like that in the family. If your tenants are first time buyers and their budget at their age is £1MM - then they must be pretty successful - most first time buyers in London don't have budgets like that - so I wouldn't let your husband sell it at a discount. I'd keep it and if you wanted to feel you were making a difference - you could always rent it again below market rate and help your tenants to save for a desposit! There are loads of lovely tenants who would jump at the chance to rent below market rate to nice landlords like you.

They would have paid inheritance tax when they were given it by his parents - there is no stamp duty to be paid when you inherit as you are not "buying" a property. CGT is only due on the actual sale price even if this is below market price - you are only ever taxed on realised gains - not unrealised gains. There is no stamp duty when you sell - only when you buy - again based on the price paid not the potential market value. Otherwise any seller who sells below market value would be faced with the same issues. A property is only ever worth what someone is willing to pay regardless of what a seller may want to achieve - therefore taxes are based on actual prices.

CGT is based only on market proceeds. So only on the increase in value from when it was first received.

Absolutely this, your tenants have made it in life, they’re fine. Many children in care have very little access to the support they need, mental health support is worse than it’s ever been. £500k could make a difference in a lot of children’s lives.

They will be great tenants having a low rent house!! 3 months in and they'll sell up laughing all the way to the bank. You may be financially comfortable right now but you never know what's around the corner and may need that money yourselves as you get older. I'd be curious what your daughter thinks about it.

Whilst I’m sure they are lovely people, good tenants etc your husband is letting his heart rule his head.Don’t forget in 6 months time it will be worth even more money ( probably ) . They sound like they have had a very good deal from you and the fact that they can afford to spend a million , means they are in a very good financial position. It’s very unrealistic to expect you to sell a house for half a million less than it’s worth. I’m pretty sure they won’t stay there forever ( first home ) and the temptation to sell and pocket the 500k profit may make them sell up straight away. Imagine how upsetting that would be , as you may not need the money now, but it could provide a good future for any grandchildren should your daughter decide to have any. Or for your daughter if she dosent. I hope that your husband can separate his heart from his head . Best wishes

Leasing the house is a business venture & as such he needs to look at selling the house as a business transaction; it’s not just about setting up your daughter; hopefully she will one day have her own family so it’s about setting a good foundation for future generations to come, I know if I was fortunate enough to have that disposable inheritance I’d want to make it work hard for my family first & foremost.

What if they get divorced after couple of years and need to sell the house? Who knows who will then buy the house. Keeping it in the family would ensure you rent to out to nice people.

not read the whole thread but to those questioning it, if they have been in finance and magic circle law for several years, then yes they absolutely can afford a 1m house (and will be able to afford much more in the future if they keep going..). she may have had a difficult background, but they are now extremely privileged.

it’s quite depressing that such a privileged couple would take advantage of this situation, but I am sure they’ve recognised that they can work your DH here. They brought up their finances for a reason.

even if your daughter doesn’t care about the house, gifting £500k to another girl her age is honestly just messed up… I would be disgusted if I were your daughter tbh.

please use your money for actual good or at least your own family!

There is a potential for a legal agreement. You could sell at the lower price but have a conditional clause that they can't sell up in a specified period without offering the property back to you for he price you sold them it. It's the same thing housing associations do.

No, that’s like stealing 500,000 off your own child.

Indeed, tax on the gain shd be yr main concern! 40% !!
They may take the house at the cheap price and sell it on in a couple of years time, then yr husband wd feel a fool. Think of yrselves first, speak to an accountant if you want some for yr retirement. Im all out for helping ppl bt this is a bit much.

Where did you get 40% from?

https://www.gov.uk/capital-gains-tax/rates

You could put a covenant in it, say if it was to be sold they have to give you the balance of its market value at the time of sale, or they have to split whatever profit they make if they sell their n the future

Take legal advice. Stamp duty and capital gains to consider.

My mother sold the family home to a buyer for less money than she could have got. The buyer spun a story about the children loving the garden. They only stayed a year and then sold, making a nice profit. Sell to highest or most reliable bidder.