Buy home from parent while they continue to live in it

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Patboy

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Hi, a bit complicated this one but bear with me.

18 months ago my sibling & their family moved in with my elderly parents under the agreement that they would buy the house from my parents for €350k. Dad told my sibling that that he had spoke with his solicitor & local estate and that all would be fine.

Our dad was in very poor health & was quite keen for one of kids to move in & it also suited my sibling. So a win-win around & the whole family were delighted with the news.

It was only after the move that my sibling enquired about taking out a mortgage & was informed by 2 providers that it would not be possible to lend as our parents had no plan on moving out. Both lenders would not issue a mortgage under such arrangement and each stated any legal advice that our father obtained was questionable.

My sibling was frustrated at the time but didn’t pursue it further as dad was greatly ill, & shortly afterwards passed away.

My sibling has been in limbo for the past 12 months and decided to get the house valued. The value came in @ €450k & they have since told me that they will never be in a position to afford anything over the agreed €350k mark as the house requires major refurbishing.

My sibling is now quite stressed and doesn’t know not what to do next. They never sold their own home but moving back isn’t really an option as the kids have all changed schools.

Unfortunately, if they were to move out there are no other properties available in the area within their budget.

Although not agreed i believe that my other siblings & our mother would be happy sticking to the original agreement if €350k.

Any suggestions on how best to deal with this situation?
 
It should be easy enough to deal with.

Especially given that the family are in agreement.

But even if they weren’t, couldn’t they just take the €100k discount as a front-loaded inheritance?
 
Did they try a mortgage broker? I know it was not uncommon years ago and maybe banks have still not gone back to doing it after the tightening up of lending but this was usually dealt with by either joining the parent on the mortgage or an agreement that the bank's security would come before the parent's right of residence. Now obviously no bank would want the hassle of trying to enforce a security where God forbid the child died and the parent was still living and they were faced with repossessing but that is a relatively small risk.

There are other considerations too like Fair Deal implications if they are likely to apply. What is the parent intending doing with the proceeds? Would it be easier for them to just leave the house to the sibling living in it on condition they paid off other siblings when time comes or do they want to give them the money now?
 
I did this in 1996 with Irish Permanent, no problem getting quotes at the time, the mortgage was in joint names with the parent with a covenant (I think it was) that the full mortgage payment was from me only. Hope you get sorted.
 
Sea Horse said:
I did this in 1996 with Irish Permanent, no problem getting quotes at the time, the mortgage was in joint names with the parent with a covenant (I think it was) that the full mortgage payment was from me only. Hope you get sorted.
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I’m sure nothing has changed in the intervening 28 years…
 
Gordon, I have no doubt it has, that's why I said "at the time" and gave the date, and hoped they got sorted now. I covered the joint mortgage issue too. More information than saying "It should be easy to deal with".

I won't bother in future.
 
Sea Horse said:
Gordon, I have no doubt it has, that's why I said "at the time" and gave the date, and hoped they got sorted now. I covered the joint mortgage issue too. More information than saying "It should be easy to deal with".

I won't bother in future.
Click to expand...
With respect, an anecdote from 28 years ago is about as useful as a chocolate teapot. It’s just noise.
 
I was looking at something similar in 2019 around buying my dad out of his share of the family home with my mum gifting her half to me with her continuing to live in the house afterwards along with myself. When speaking to the banks the main issue was if my mum would have a right of residence in the house after I got ownership. If I recall they would only offer me a mortgage if their was no right of residence. I think it was AIB i was dealing with at time.
 
Someone buying a house from a parent at a discounted price is straight forward enough. Just don’t ask the Bank to agree to any right of residence and I can’t see any problem (assuming all other mortgage criteria are also met).

If the Bank can‘t repossess and sell a property in the event of default then the mortgage isn’t worth the paper it’s written on - hence a legal right of residence for a previous owner makes a mortgage impossible.

Do a side agreement as new owner that the surviving parent can stay with the new owner until they pass.

The suggestion above to use a broker is a good one - they will know how to message it correctly for a formal Bank application.
 
Is the house in your mother's name, what was the status of that following you father's passing? That might need to be sorted first, no idea how long it takes but investigate as it can probably be done in parallel to sorting out the purchase details.

Can your sibling sell their old property to part or fully fund the purchase to avoid having to take out a mortgage? Assuming if they have cut ties by moving kids schools then it is a permanent move?

What value is the right of residence? On the open market the house might be valued at 450k, but there would be a discount for the mother continuing to stay. And also get some other valuations, an estate agent might be giving a high valuation to get business, but see what others think and do some desktop research on this for houses in similar condition. This is important as if the house is sold at a discount, your sibling will eat into some of their tax free allowance so best to make sure it is accurate.

And don't forget the incalculable value your sibling has provided and continues to provide you all by living with parents. Any potential inheritance could be eaten up by nursing home care in the absence of them. Moving their family to a new place, living with other people and in a house that needs renovation work was a huge step and I am sure not lightly undertaken. In the next few years despite how relations are now people can and do fall out over inheritances and perceived fairness of same.
 
Yes, its a below cost sale, they will unfortunately be liable for CGT on the difference though.

But if your mother is still alive, leave things be for now, and sort it out later on when she passes away.
 
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