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?!

Threads too long to read it all. If he sells at an under value he still pays CGT on the market value. 28% is the current rate. So he’d still pay an extra £140k in tax on top of the % of the gain up to £1m.

Work out what your CGT will be.

If they decide to sell the house and move back up North that will forever taint the memory of such a kind gesture. What about selling them a 50% share and gifting your daughter the other 50% share? This way they are building equity but it’s all done at market value.

Shared ownership? How about you keep 35% stake in the house and sell them 65%. They pay peppercorn rent for the 35%. Your DH stil gets to potter in garden occasionally, and you profit fairly if they want to sell (you agree to sell up when they want to and also agree to let them buy you out if they want when they can afford to. You get the 65% to help DD pay off her mortgage.

OP, I'd examine your husband's motives a little more closely here. is he looking on this couple as, somehow, surrogate children? How is his relationship with your own daughter?

He says the girl "reminds him of his mother". Is he hoping to retain an emotional connection to the house and, by extension, to his family history, by doing this couple such a big favour that will feel indebted to him and remain in your lives, allow him to continue working on the garden, etc.?

I'd also consider the couple's motivation. Could they be subtly (or not so subtly) playing him? They're clearly not stupid if they're so successful that they can afford a £1m mortgage. It's interesting they mentioned this figure to him.

I don't know your personalities, particularly your husband's, or your circumstances beyond your post, but I'd tread carefully.

Having said all that, I also second most PPs' points that this couple sound financially better off than most already, that they no longer need your husband's charity - having already received a lot of support by paying him well below-market rent prices for years, that charitable purposes would be far better served by a donation to those in genuine, desperate need, and that the risk of the house being quickly resold - and your husband left feeling hurt and a bit of a mug - is high.

My thoughts too.

I wonder if it is possible to say if they sell the house for market value, they need to pay the additional money back? So effectively, you are loaning the 500k...a lawyer could draw up the contract.

Whilst a kind thought, I don’t think this is a good idea. The tenants have benefited greatly from having a house at less than market rate and having a good landlord.

My parents friends sold their family home to a friend of their sons. They sold it at less than market value because he’s so loved the house and wanted it for his family, yet he resold it shortly after …

No way! Also even the charging way below market rent isn't great. This is money that could be going to your own family. Slightly below is fine or not increasing it ridiculously is fine but why are you prioritising strangers rather than your own daughter.

DP's parents also charge way below market rent on a property they own whilst their only child struggles to save a deposit and are still renting. It's madness that they are
prioritising strangers over their own family. Please don't do the same!

If the house was worth £150k and the couple could only afford £100k then I would understand that your DH is helping a couple in need.
They can afford 1mil, it’s a very different situation. Whatever the financial situation of your DD £500k would benefit her. Does your DH have a good relationship with your DD?

This is batshit crazy. Of course you don't give £500k+ to total strangers.

If you do and they've got any sense they will put it back on the market the day your sale completes, buy a house in their price bracket and bank 500k.

While a lovely gesture, agree with others a couple that can afford a wedding and £1m mortgage are ok.

I'd be tempted to sell and give money to charity to help others.

Please remember the saying no good deed goes unpunished.

We are currently having a nightmare with tenants we trusted and gave an excellent deal on the rent to. We’ve had to go to court to sort it out, with all the associated stress and cost. How I wish we’d let it at arms length via an agency.

There will be nothing to stop them cashing in once they have got the house. I wouldn’t contemplate short changing your daughter so that these people, who are tenants and effectively strangers beyond that, may benefit.

It’s a lovely idea but they don’t need your help if they can afford a 1 million house. Sell up for what it’s worth and avoid any unpleasant future surprises.

Its a lovely idea but misplaced.

If it was a few thousand i could understand it, not having to honor the open market and pay estate agent fees, plus the extra hassle. But that's too much of a drop. Sell at market value and give the balance to your daughter to get a property to let in the same way your PILhelped you if you don't need it.

One day you may no longer 'live in' and that 500k might be very useful.

They have likely inherited as there is no way they could save to have a budget of £1m without significant financial help. It’s ludicrous to think otherwise unless they both earn upwards of £100k and have done so for the past few years.

Also no one has the right to be rich or the right to have what everyone else has. The average family house size in the UK is 900 square feet 3 bed- owning one of those would be good enough for most people. But I have no pity that a well off young couple can’t afford to buy a £1.5m 5 bed in London for just the two of them when there’s people who can’t afford food and children without homes in this country.

Your husband sounds like a lovely man.

But basically he's giving this coupe £500000, when he could he giving it to your DD. Or he could buy two properties and and two families could be mortgage free (future grandchildren?)

A generous wedding
gift would be much more appropriate.

I'm assuming you have some say in this and its not your DHs decision.

May be look in to setting up shared ownership with them, or a covenant that they need to repay the % difference if they sell.

Chances are they will buy the house cheaply and sell up soon after, pocketing the profit.

5 beds
Garden - big - enough for DH to drive down to tend
Near lovely, leafy London park
Fantastic school catchment
Unless 3 beds are cupboards £ sounds off!

Where is it approx?

That said houses near us selling 200k less than 1 year-18 months ago.

You are still relatively young, and have no idea what the future could hold in terms of care needs for either of you. Do not give away 500K.

[name change] The exact same scenario happened in my family @MrsLyndi . Please don't do what your husband is suggesting. You have got real, living family. A daughter. Sell the house true market value (or keep it - a house in London is an unachievable dream to most) and keep the money for yourselves or your daughter.

The suggestions on here that you are somehow owing a moral debt to give half a million to charity are absurd. If anyone here wants to give half a million to charity they can give up their own inheritances or sell their own houses and do so. But they're not going to do so because it would be absolutely FOOLISH. You don't need to give ANYONE money just because some cuckooers are leaning on you emotionally!

You or she might need that capital for private healthcare, given the state of the NHS. Or you could stop your grandchildren from getting into horrific university debt.

So no, don't sell below market value and don't give away money as some kind of bizarre alternative.

I now am in a terrible life situation where I need surgery I can't afford and I often cannot pay for food. Sometimes I think of the million+ my family gave away to strangers. Please don't do it.

Another one who thinks a five bed in a "lovely part of London" will be way more than 1.5 million. I used to live in a five bed house converted into flats and the ground floor two bed went for just over a million. That was a numb rof years beck so prices have risen even further. Have you checked on Zoopla for the estimated value/that of comparable neighbouring houses that have sold more recently?

He probably thinks he will still be allowed to.come Potter in the garden after they buy it. He wouldn't and they will likely feel strange the ex landlord still being about. He is letting emotions dictate this and that is a bad idea.

Giving existing tenants a bit of a discount because they wouldn’t be able to afford to buy otherwise is one thing, knocking 500k off a house that’s worth 1.5 million is another. I think it is far too generous and would worry that they will sell up quite quickly , taking the profits that should have been yours with them. Your husband sounds lovely for considering it but he should think with his head not his heart.

Where in London, near one of the big parks, can you buy a lovely 5 bed house with garden, driveway, good schools and transport links, for £1.5million?!

No that is madness. I am actually considering doing similar (if my tenants can get a mortgage), mainly because I hate the responsibility of being a landlord.

BIG DIFFERENCES - (a) my tenants are members of my family so I have a vested interest in them having a nice family home, and (b) I don't have and never will have children to pass any inheritance to so if I did sell for a profit it'd probably be these family members who'd benefit anyway if there's anything left when I die.

If either of the above weren't true there's no way I'd even consider it tbh. Surely your DD and any future/existing kids she has are more important?! I think your DH is trying to do a nice thing but it's very misguided.

And as others have said, if they can afford 1m then they don't need your charity!