Agreement on price for sale of share in apartment

M

monius

Registered User
Messages
3
Hi

This maybe a simple question. I am considering getting out of my apartment which I have owned with a friend since 2003.

She is considering taking on the mortgage (tracker) if the bank agree that her application is successful and she can take it on.

We bought it for 330k. It is now worth 250k and we owe the bank 210k.

Is it as cut and dry as 40k divided by 2 to get my share? Or do I need need to consider costs saved by not going with an estate agent?

i.e. 40k/2 less share of costs that would have been incurred going with an EA (3k) therefore share is 17k.

Should I consider anything like the equity that I have put into the property over the 13 years?

Everything was 50/50.

Should I also consider the fact that she will not have to secure a 20% deposit as she can potentially take on the mortgage. Also the fact the there might be future value in the property.

I am not concerned about the 20% on my side as I am emigrating.

Many thanks

M
 
I think that you are very much seeing this from your own point of view.

Assuming that your friend doesn't want to sell, and you don't have a right to force a sale, then the €250k valuation is very notional. That might be what the apartment would get on the open market, but its not on the market and one of the owners doesn't want to put it on the market.

If your friend, and the bank, allow you to remove your name from the mortgage and the title deeds, you are getting out of a €210k debt. I think you would be doing very well to get any cash out of the deal as well.

Your friend could very reasonably say, that she doesn't want any change and that you should continue to pay your share of the mortgage while you are abroad.
 
Thanks for your reply. We have both agreed that it is time we went our separate ways.

The agreement is that we would either a) put it on the open market or b) she would see if she can take on the mortgage.

My question is merely if both parties are in agreement to sell and one takes over the property, regardless of the valuation being notional or not.

How should an agreement be reached on a price?
 
What you paid for it and what you put into it is not relevant anymore.

What matters is the value today; the amount outstanding today and the terms of the mortgage.

It sounds as if you both want to reach a fair deal, so your friend would not exploit the legal difficulty you might have in getting out of the deal.

So, it were not a tracker mortgage, the calculation would be very simple:

Value: €250,000
Mortgage:€210,000
Value of asset: €40,000
Your share: €20,000

But the tracker makes this much more complicated.

If you were trying to maximise your share you would argue as follows:

You have a mortgage of €105,000 @ 1% over the remaining 15years. The repayments on this are €628 per month.

The repayments on €88,000 @3.5% over 15 years are also €628 per month.

So if she can take over your tracker, she is getting something worth up to €17,000.

It will only be worth this if she keeps the mortgage for the full 15 years and if the gap between the tracker rate and the non-tracker rate remains at 2.5%.

If she loses her tracker when remortgaging, then your tracker has no value at all.

So, she should apply to your lender to take over your part of the mortgage. If they approve and don't try to push up the mortgage rate, then you could do the above calculation and see what result you come up with.

They may refuse to allow her take over the mortgage at all, or they may give her a new mortgage and take the tracker rate from her.

If they refuse to give her a mortgage at all, I don't think you should force a sale. If they insist on taking the tracker rate from her as a condition of taking over the mortgage, then you should retain your share of the property. She should pay the full mortgage. You would own half the equity i.e. as she pays down the capital, the value of your 50% increases. If the property falls in value, your share will fall in value accordingly.

At some stage in the future, as the mortgage capital is paid down, the value of keeping the tracker will reduce, and you may choose to go your separate ways at that time.

Whatever you agree, make sure to put it in writing.

But first of all, she should approach the lender and see what their attitude is.

The key thing here is that you have a very valuable investment. A cheap tracker on a property in positive equity You probably should not give it up unless there is a very good reason to do so.

Brendan
 
You must log in or register to reply here.
Back
Top