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?!

Years ago, my then-DP and I were offered a large house at half the market price by an older couple. We were renters and could nowhere near have afforded to buy a house like theirs. It was a different situation to yours but still, we thought it was a terrible idea.

We knew it would come with emotional or moral strings attached, which we really didn't want. We knew the house would never be truly our own while they were around. We knew it would cause resentment (or even legal challenge) from their daughter.

As it was, the couple died not all that much later, so we would presumably have been left with an inheritance tax bill on the gifted portion that would have meant losing the house anyway.

Even years later, we chuckled at what a mess we avoided. No regrets at turning down a supposedly free fortune.

OP, your husband sounds like a lovely person but as you say the logic is flawed. The young man has clearly overcome his early life challenges and is living in central London with a budget of £1mil for their starter home. They are not the charity case your DH seeks.

Tbh I wouldn't be surprised if they are CF and have spun your softie DH a tale, and invited him to the wedding to see what will be offered up.

Also there are the same Capital Gains Tax implications even if sold at an undervalue. Be warned.

This couple are clearly very astute and will sell the minute the papers are signed.

Your poor DH will be absolutely heartbroken and all the goodwill intended will be lost.

Please get him to seek financial advice. He is wealthy enough to not be making foolish decisions like this.

I would first find out what it really is worth, not an aspirational price estate agents state to get your business but instead get 3 valuations and state prices to sell quickly to the estate agents.

Then take 10% off that because the buyers would haggle and you would have more fees. How close is that to what your being offered? Might be far closer. Houses have dropped significantly in some areas, in others they simply aren't selling

Ask him this, would he and importantly his parents prefer to give people you dont really know £500,000 over your daughter?

the answer should of course be it goes to your daughter, even if not now, then eventually. Because she may not need it now but what of possible future grandchildren?
That could be their education fund he is giving away to your tenants.

id suggest getting it valued x3 and possibly offering the tenants first refusal at the lowest valuation with an off market sale. But otherwise put it on the market at a fair price.

Of course they will sell up and make a huge profile.

Your husband is a fool.

Why not sell the house for the highest price he can get and then after he's set aside enough for him and you and your daughter he can give money to various small charities that mean something to him.

Lovely idea but no.. His loyalty lies with his own daughter and any grandkids, now or in the future. Who is to say that there won’t be a greater need in future?

This would also potentially raise eyebrows at HMRC as it looks like he’s doing a fast one and avoiding capital gains tax but selling significantly under market.

I also think the husband had a romantic crush on the tenant. Not a distasteful sexual attraction but a romantic soppy old fashioned crush.

This

They must be doing pretty well to afford a £1M mortgage.

That's even more deplorable. Public services could do with some of that money more than a couple of privileged 20 somethings.

Yes, this.

Which might be more understandable if he didn't have a daughter the same age as the tenant.

What I mean by that is, his desire to pass the house on to a young woman who reminds him of his mother and might fill it with children would be more normal if he were an old childless man. But since he has a daughter the same age, she's likely to have very complicated feelings about this, or even wonder if her father prefers the tenant to her.

You say you don’t need the money. But you always need money. No one know what will happen tomorrow. I’d take the half a million pounds financial fallback. The young couple sounds lovely but they’re not family and they’re clearly not in need if they have a one million pound budget for a first home!!

Quite frankly he needs his bumps read if he does this.

Has your daughter got a 5 bed house? If not then this couple will be in a better situation than her.

After tax, cgt andd the 500k to dd there won’t be much left for you.

At the moment grandchildren are a figment of your imagination. In a few years time, when you have little creatures and their personalities develop, you’ll be kicking yourselves that you won’t be able to help them on their own roads to owning a house. Or private school for that matter.

Oh man, I'd be so mad. But as others have said he's thinking emotionally.

If these people can afford a million quid house they are hardly a charity case!

You and or he could easily need a lot of money for care in your old age. Unless you have hundreds of thousands set aside for that, this could be extremely important money for you both later in life.

Does your daughter know of this plan? Would she share your view? Can you bring her in on it to argue a joint case?

The levels of resentment this could generate within your family could be huge. That isn't always a good reason not to do the right thing, but in this case I think it's indicative of what the right thing to do is.

Honestly, I don't blame them for doing it, but I suspect they've tried their chances with him. Named a price that they hoped would get this result, and he's walked right into it.

The description of this house sounds like it could be in my area which is outer London- not a London postcode but a London borough and near the biggest Royal park. £1.5m not far off the mark for 5 beds depending on size and exact location.

I haven’t read everything so apologies if someone else has suggested this but one option: you sell to them for £1m, with them taking out whatever mortgage they need to facilitate that, then they grant a second-ranked security (don’t know the English term sorry but assume it’s the same - the charge that secures a mortgage) for £500k in favour of your daughter. If the house goes down in value, the bank will take whatever equity there is (they wouldn’t grant a mortgage if your security came first) and your daughter wouldn’t have control over when she gains access to that money, but they can’t sell without giving that money to your daughter, and couldn’t increase their mortgage without your permission. Any increase in value from the day you sell to them they keep.

You’d need to take legal advice obviously, but it’s not a hugely unusual or complicated arrangement, so shouldn’t be too expensive to set up.

I’m not saying I think you’re morally obliged to do this by the way, just one option. I can understand your husband wanting to have people he likes raising a family in the house he grew up in, but agree it is too much of a gift/windfall for these people who just happened to luck out with their landlords.

Absolutely not.

I would be very cross at this suggestion.

This is not a couple who are desperate for their first home and are short 10k and you have pots of money.

OP, they are chancing their harm, and why wouldn't they!

They have been getting a great deal for years with lower rent.

They may be very nice but they are no fools.

I would shut your husband down sharpish.

This can’t be real as name me anywhere in London where you can buy a house of this description in a ‘lovely’ area? With unusual tenants too…

Get him to look up how much a decent care home costs, then times it by the both of you.

Had he factored possible scenarios like needing care when you are older into his calculations?

It's madness, of course.

And what about when grandchildren come along and reming him of his parents?

If he sells it to them and they ever want to move, job relocation/break up etc then they will sell it at market value, making the profit that you are referring to. It’s a terrible idea. Keep renting it cheaply to then.

Not really. I googled and the first house I saw was a really beautiful one in Shepherd's Bush/Ravenscourt Park - safe area, 15 mins walking distance from Holland Park, 5 mins to tube etc. The house was massive and beautiful. And there were 2,500 listings below it. That was just the first I saw, so several of them are likely to be in nice safe areas near parks and good primary schools.

Are you serious?

If a young couple can afford to buy a house at 950k, they are not struggling to get on the housing ladder! They are seriously wealthy!!!

I'd want to do this and I'd absolutely need somebody to be firm in talking some sense into me. Don't let him do it. It probably feels like the right thing to do in his mind but it's far too generous, sell for market value. The tenants will be fine with a million budget, they're not his children. He's been kind enough already.

Ok, I haven’t read everything.
The house is in South East London. While a 5 bed now, was only a 3 bed when DH was gifted the house, we did an attic conversion and dormas as was standard for the area.
So really it’s a 3bed end of terrace that’s been converted. The downstairs doesn’t have loads of living space, 2 of the bedrooms aren’t massive etc. It’s also just off a busy main road and backs onto a council estate which lowers the value. I think the valuation is correct for the nature of the house.

DHs sister passed 24 years ago.

I don’t know how they have saved enough for 1mil!! They both make 6 figures, she works in magic circle law, so has been making 6 figures from very early in her career. Not so sure about him but he works in finance I’m sure.

I’m going to suggest he sits on it for a while, I don’t think they need the help and it’s a ludicrous waste of money!!

He probably envisages still being attached to the house and this couple that he feels protective of . Selling will be a wrench that maybe he's trying to reduce for himself. They're I'm sure hugely grateful for the break they've had in living there at a reduced rate, he's done a lot for them already. He needs to properly let go of the house if it is sold, it seems like he's avoiding that.