To ask seller to reduce asking price due to stamp duty increase

[Ouch12]

Hello,
I am on the deeds for my parents house. They couldn't qualify for a mortgage as they were too old, so I was added to the mortgage.

I am now buying a house for myself - purchase has been ongoing for 2 months.

However, my can't buy me out from their current home - they just don't have the money.

In the Budget stamp duty on 2nd homes increased for 3% to 5%. This means I will need to find an additional £10k for stamp duty, which I don't have.
I will try to increase the mortgage amount to cover the extra £10kz

If the bank don't, I don't know how I will be able to afford the additional £10k. My parents are already gifting me money, so I cannot ask them any more.

Worst case, I might ask the seller to reduce the price by £3k -£5k but I'd imagine they'd be pissed.

Would you be willing to reduce the price if you were selling.

I’d be majorly pissed off if you asked for this, you knew your circumstances and we’ve known for ages that labour was going to put second home tax up - in Scotland it’s 6%, you could have used this as a base for your own affordability check! However, up to £3k to avoid you pulling out and increasing my other fees is potentially something I’d consider if I didn’t have significant demand for the property. Not a penny more though, and I would certainly be taking into consideration how difficult you’d been throughout the process.

Why would they? Your finances aren’t their problem. 🤷‍♀️

Good luck 🍀

That's your parents fault. They should be covering that.

No I would not reduce the price for you. I’d expect you to add this on to the mortgage if you were unable to fund it with savings or other funds. Why am I having to absorb the cost that is down to your personal circumstances and nothing to do with the state of the property?

If you genuinely cannot proceed because you really don't have the extra money, then be honest and open with them and see if there is something they can do to keep chain going. That's perfectly fine. As a seller I would understand. We had this from our buyers but it does irks me when they cried poverty before exchange asking for a reduction, only to drive pass my old house once a month and see loads of expensive upgrades done to it! Where did that money magically come from?

If your vendor won't accept a reduction in your offer, you will probably have to return to searching the market for a cheaper house that you can afford.

Your circumstances weren't entirely unforeseen so best policy would have been to looked for a property that wasn't close to the top of your budget. That would have given you the wiggle room that you now think your seller should provide you with.

This happened in Ireland a few weeks earlier due to our budget but only at the higher end of the property market.

I know of a few cases where buyer and seller agreed to split the difference to ensure the sale was finalised.

It's absolutely worth asking but no more than splitting the difference.

No way would I be prepared to pay your tax increase for you. I’m being hammered myself as it is.

No I wouldn't. What were your expectations regarding a future property purchase when you agreed to that arrangement? Tax on second homes was always a risk. Also what if you couldn't get a mortgage because you were already on theirs etc?

If the mortgage is paid off, just remove yourself from the deeds and you won't be buying a second home any more. Job done.

I think you need to wait for clarity. This law might not affect you as you had put an offer on this property when a different law was in place

Contact your solicitor before you start going crazy

Also I truly hope you did take that mortgage out over 10 years ago at the very least

I think if you have already exchanged contracts your purchase will be exempt based on the draft legislation:
assets.publishing.service.gov.uk/media/67209bf934853837d7fc40f8/SDLT_draft_autumn_2024.pdf

So you need an extra £10000 due to a rise from 3% to 5% tax? This would mean the property is worth £500000

Why don't you ask your mortgage provider for more money, maybe extend to a longer term to make it affordable.

Or your parents could sell up, and downsize.

Well you can ask, @Ouch12 but they may say no and they will obviously be annoyed. The seller will need to weigh up taking a reduction (what's the % reduction by the way) with the risk of marketing the property again and possibly having to accept a lower offer. Stamp duty goes up further in April 25 so a new buyer would need to take that additional cost into consideration when making an offer now.
I think there will be lots of chains that end up breaking or being re-negotiated because of this change. Online brokers were apparently receiving emails about re-negotiations straight after the budget.

The OP isn’t clear, making it seem as if they were just named on the deeds as a formality but then saying they also occupied the property as their primary residence?

If the parents sell and downsize, @randomchap, the chain will clearly fall apart anyway and the seller will need to re-market.

I wasn’t saying OP should have budgeted for it. I’m saying my buyer asking to reduce the sale price because of the budget is their issue, not mine. I don’t have a second house, I’m unlikely to have a second house and I don’t see why I should take a financial hit because someone is purchasing my house as their second house. It doesn’t matter the situation as to why this OP’s second home the fact remains that it is.

Did you miss the bit where I said I would probably allow some wriggle room if genuinely close to exchange? But all trust is going to be gone. Again it doesn’t matter that the budget came out today because I still don’t have a second house and OP does and I’m taking a financial hit for OP to have two homes. I’m going to feel like the fact that it is near completion has me over a barrel of accept this or lose my onward purchase. OP is asking how we, as sellers, would react and this is how I would react as a seller. The trust would be gone and OP would get absolutely no good will from me. All the good will have been used in OP not paying the full tax. You can think it’s harsh but that’s the reality of what a lot people, likely including her sellers, will think. If you think it’s harsh, you are of course welcome to make up OP’s shortfall out of your own pocket.

What are the figures?

3% stamp duty plus another 2% is £10K making your new home at about 500,000K?

so total stamp duty is £25,000 now?

Yet you own £75K in your parents home?

If they can’t buy you out they should give you a nominal sum and then leave the £75,00 to you in their will - ring fencing it

Or you should suck it up and find the money!

YABU and would be a CF. The stamp duty does not go to the seller, so why should they get less money because of the recent rise?

It's just the reverse of what happened when Sunak suddenly cut SDLT in 2020-2021. Seller increased their prices in excess of the stamp duty cut, buyers were forced to pay more. Increasing SDLT will tend to have the reverse effect. It doesn't matter what the morals of either the cut or the rise are or whether it was fair on buyers back then or sellers now, it's just a market and increased fees tends to lower prices and visa versa. People can be annoyed and that is a reasonable reaction but it doesn't change the situation.

Would you still understand as a seller if you found out your buyer was mortgage free on their first property? That's an absolute piss take.

How much are your parents giving you to help buy your new house?

If you want to retain your interest in your parents house, get a cash gift from them, and have your sellers bear the brunt of your tax liability, it’s hard to see how you don’t just want it all your own way.

I might agree if I was desperate not to collapse the chain, but I’d be making zero effort to leave you a clean house and tidy garden, and there’d be zero extras. I’d take the lightbulbs!

On this basis - I would ask the EA to explore whether the vendor would entertain reducing/splitting the cost when the alternative is a collapse of the chain?

Others in the chain may be similarly impacted so there may be a ripple effect anyway. If they decline you’ll know where you stand.

I would get your self off the deeds asap. You might save yourself inheritance tax (I doubt it as you can get 1 million tax free if you are inheriting your parents’ home) but you will be giving yourself a massive capital gains tax bill in the future if you try to sell your parents’ home.