Is this too good to be true - Selling my home!

[Beau]

So here's the story.

My home is on the Market for 375k. I have a family who are interested in purchasing it on these conditions.

They'll rent the home at a agreed price for a year, before purchasing it outright at the end of the year. That agreed price will certainly be top end price for my area which is a plus for me. When they move in they'll put a 40k deposit down for the home, 20k when they move in and the following 20k in 6 months time.

At the end of there one year renting period, they'll then be able to financially buy the home outright, at a price of 375k - 40k Deposit.

Now for me this isn't too bad of a deal. I don't mind renting the home for a year at a good price. I have met the family and they seem nice in person. I am in no rush for the actual capital of the home so don't mind waiting another year.

Now the only bonus I can see for them, is that in a years time my house will probably value at least 400k and so that means they'll essentially be saving 25k for holding the home for a year which will cost them 12 months of rent.

I plan on getting everything on paper through a lawyer and getting it all done legal. But I just wanted to know if anyone's heard of people doing this, for me it's the first. I thought there may be some sort of scam to it, but haven't heard or seen anything. I haven't pushed forward with it yet as I'm going to think things through.

What are you guys thoughts?

 

[Chas]

The first thing that comes to mind is if at the end of the rental period they don't pay up and refuse to leave.

 

[Beau]

The first thing that comes to mind is if at the end of the rental period they don't pay up and refuse to leave.

I'm thinking of putting there deposits as "non refundable" in the contract, and if they agree to that then surely it means they're serious about it. But yes, it would be a pain if they did something like that.

 

[froggy Steve]

Not heard of that before, but your rights, does sound like a plan! The only downside (apart from trashing it and not leaving) is that the value goes up but you do get the rent to compensate - get legal advice and when needed call in some big guys

 

[Dave]

I was looking at a not too dissimilar situation a few years ago, Basically, it would never get past the lawyers. There are just too many ifs buts and maybes to try and cover yourself (and themselves) for. So much can change over the year (deaths, divorce, fires, prison sentences, bankruptcy, you name it). Even if your solicitor thinks he has covered everything, their solicitor will still find something else to favour his side, which yours then won't agree on. And even if you think everything is covered, it may still end up in court and be for them to decide, costing you a ton of money and weeks, months or years in litigation.

If they want the house,tell them to buy it the regular way. If they don't, sell it to someone else that will.

 

[stumog]

Sounds smelly to me is this what they came up with?
I would rent it to them for a year and then give them chance to buy at the end for say 10k less then market value. Just to sweeten there deal a bit. I think you are opening yourself up to give them the house for 40k from the sound of it.

Stu

 

[AndycruiserguyLomas]

You might just find they are growing cannabis in every room, the second installment wont arrive and when the Plod arrive you will be arrested and be charged. I've seen it happen in our village and no matter how you dress it up they wont believe you.
This might just be a worse case scenario but I would take my chance on the market.
,
.Andy

 

[moggy1968]

You might just find they are growing cannabis in every room, the second installment wont arrive and when the Plod arrive you will be arrested and be charged. I've seen it happen in our village and no matter how you dress it up they wont believe you.
This might just be a worse case scenario but I would take my chance on the market.
,
.Andy

yeh, but you live in Yorkshire!!

 

[clivehorridge]

The problem (as debated above) is that contracts get broken, my job is dealing with breach of contract daily, so it's not a rare occurrence believe me!

The housing laws in the UK are much in favour of the occupier, and I would be very wary of leaving myself exposed to squatters rights. Having said that, everybody letting property on a rental basis takes the same risk of tenants not leaving when the contract expires or they default on payments.

I let a property for 15 years and it took some doing to get the tenant out when I finally sold the house. Luckily, I had taken advice from the start and had let the place furnished, which apparently is a much easier basis to enforce an eviction of a stubborn tenant.

You really need good legal advice from a lawyer who specializes in property rental/purchase contracts, and take that advice, even if the alternative is much more lucrative. The heartache of a failed eviction can be devastating to you and your family.


I'm rambling a bit now because this next bit is not necessarily relevant, but I know of a similar situation, sort of in reverse.

A colleague of mine "bought" a rectangle in the sky, meaning an apartment that had not been built at the time of the "sale".

The agreement was a fixed price of 135k two years in advance of its construction, when the property market was booming at 20% per annum here in 2008.

Deposit of 30K and the balance of 105k to be paid within one month of completion. No deposit refund, in the event that the buyer couldn't pay the balance. Bank loan Money was cheap and readily available because of the boom.

He paid the 30k deposit (all his savings) and during the construction period, the housing market totally collapsed.

When the construction was completed, he went to the bank to borrow the 105k. They valued the apartment at 85k and maxed the loan out at 75k leaving my colleague short by 30k at the risk of losing his life savings of the 30k deposit.

What a bummer, he managed to scratch the money, selling some bits of family land and borrowing from friends but what a bad time he had. The developer's lawyers were all over him, and I'm sure he would have failed any attempts to get his deposit back, the contract was clear. He didn't even have any occupation leverage. He didn't have the keys

Good luck with getting advice and the agreement (if any). Please don't take chances, nice people get greedy and nasty without warning.

 

[AndycruiserguyLomas]

yeh, but you live in Yorkshire!!

Yep, Gods own Country, tell me its not the best county Andy,

Andy

 

[stumog]

I live in the best county Andy.

 

[Shayne]

Only one answer to that Beau and its NO!

There's no such thing as "nice people" when there's that kind of money involved , sad fact is there's no family nor friend's either . Your posting the question tells me you should remove yourself from the sale as much as possible and let the professionals do it after agreeing a fee .

 

[Beau]

Like Clives Friend above,

If I state the 40k Deposit is non refundable once put down and they will lose it in a given time frame if the rest of the money is not there to buy the home, what else can really go wrong? No ones's growing anything Illegal in the home, it will be managed and kept a close eye on during the year.

I will state the 40k has no actual hold on to the property until the rest of the money has been paid in full at the end of the year. So in theory the 40K is only there to stop me seeking other buyers and keeping the house on the Market.

 

[Shayne]

You could end up with a house worth less than 40k at the end of it , that's a very big risk . I looked into buying and selling and renting out property before buying my boat . As has been said already the law is 100% in favour of the renters which killed the idea for me . The renter can pour concrete down the drains which means you will by law have to replace the entire sewage system for the house , a small electrical fire is not hard to start and they can force you to rewire the entire property , a dodgy flush on the toilet and they can refuse to pay the rent and it will take you at least 2 years to have them legally removed , 2 years at £500 an hour for a lawyer .

Looks to me your not in a rush to sell so depending on your mortgage status why not just rent the place out via an estate agent , shop around and you might have to let them keep 15% of the returns but still it's an income and more importantly the estate agent takes full responsibility for repairs etc . That's a contract lawyers would be only to happy to write up .

See how it goes in America and you can always sell when the lease is up .

 

[adrianr]

Couple of initial thoughts:

make sure you separate the transactions:

RENT
make them pay a normal deposit for the period of the rental - all rent deposits must be secured in TDS at the start of tenancy. don't forget to secure the rental deposit - penalty can be IIRC 3 months rent plus the initial deposit - you have to pay if you don't lodge the deposit properly.
You can issue a section 21 near end of tenancy to ensure they leave at the end of the rental period if they don't complete the purchase.


This would normally be 1 month or so of the agreed rent. secure the tenancy with an assured short hold tenancy.


THE SALE
Either Make the initial payment a non refundable part payment and not a deposit.

or perhaps better still have then pay the deposit, exchange contracts but delay completion for 12 months. that way they are committed to complete.
i have friend who buy properties to rent out this way, in some cases delaying completing by many years.

either way good luck.

 

[kamalsrana]

Hello, all comments seem fair but I have seen this before, its called Letting out with an option to buy. Basically what you should put into your contract is that if, in the event that the proposed purchaser defaults or is unable to buy after a year all the 40K will be taken as rent and cannot be treated as a deposit. It will only be treated as deposit if they come up with the balance but is not refundable either way. You see they could otherwise ask for that deposit back if the property sale does not go ahead. I would reccomend that you take the 40K in one go and tie their nuts. Also make a full itinerary of all items in the property before or via a qualified property letting co. Include in the contract that after the agreed date of purchase if they cannot proceed for any reason they must hand the property back in the order they received it otherwise you will have to charge them for all damages and lost items.
I hope this helps.

 

[Crispin]

I don't see the point of the 40k? Of they willing to rent at the top end for a year then why not do that and tell them to see their money. Then after a year your sell it at current prices?