Browse Forums Home Finance 1 May 18, 2009 9:12 pm Hi all, just after some advice/ things to look out for when buying a house from a family member. We are currently living in my MIL house who lives overseas, and we are looking at purchasing it off her. My mortgage broker has said something about special conditions because it is a sale 'not at arms lenght'. Anyone had any experience with this, or have any ideas what is different to a normal sale. TIA Re: Buying a house from Family 2May 18, 2009 9:43 pm I have had experience with selling to a family member An investment unit we held for 6 years we then sold to our son, simple matter of going to conveyancer and he drew up contracts for private sale. Both parties were in Australia though, in fact in same town, so could all go to conveyancers in person and sign papers there. We agreed on a price which was aprox 30 - 40K under market value, our choice, as sellers we knew we could get a better price on open market but you know, parents (had to get him to leave home somehow ) We were advised however not to sell it under official govt valuation - ie the ones which appear on your water/sewerage rates - as this could be perceived by taxation dept as being a rort to get out of capital gains tax. These valuations are notoriously low, we sold at $6k above official valuation, still well under market value. Obviously both parties have to trust each other - or get independent legal advice if you wish - we did not, transaction took place over 12 months ago, both parties happy with outcome. We did not sell 'directly' to our son, ie he still took out a bank loan and paid us full amount and is paying mortgage off like anyone else, I think this is important even if seller does not need the money as it makes the deal a done deal, no changing of minds or ongoing obligations later on. I also sold my residential house by private sale, to a friend of the family, price agreed on by both parties, slightly under market value but we saved on agents commision and 'dressing up property' costs,as well as being able to name settlement date to suit ourselves, win-win situation for seller and buyer. Sale was subject to usual valuations etc undertaken by his lender. Hope this helps, Helen Re: Buying a house from Family 3May 19, 2009 5:32 pm alinpete Hi all, just after some advice/ things to look out for when buying a house from a family member. We are currently living in my MIL house who lives overseas, and we are looking at purchasing it off her. My mortgage broker has said something about special conditions because it is a sale 'not at arms lenght'. Anyone had any experience with this, or have any ideas what is different to a normal sale. TIA Bank's valuer will possibly value it hard as it will be a private sale without a licenced real estate agent and the possible "expectation" that the price may favour the vendor as it is a related party transaction (not arms length). The last one I was involved with was some time ago but from memory the vendor gave part of the equity as a gift to the buyer and this was accepted as the deposit itself so it was essentially a no deposit loan. I think lenders' policies now would not allow such a transaction, not up to date on this but they would possible want a cash contribution from the buyer. This is probably one of the special conditions your broker mentioned. Re: Buying a house from Family 4May 19, 2009 7:18 pm The Buyer will probably need a market appraisal also for stamp duty purposes. The good ole' govt won't want to miss out on any stamp duty lol!! In Qld, if a property is sold to a relative, a market appraisal is required for s/d purposes. If a property is sold (with contract) for $100K but valued at $125K, s/d is paid on the higher value NOT the price paid. Also, lots of banks won't give out the valuation done as part of a loan approval process, but a market appraisal from a real estate agent local to the property is all that is required. Re: Buying a house from Family 5May 19, 2009 7:47 pm Chyloe The Buyer will probably need a market appraisal also for stamp duty purposes. The good ole' govt won't want to miss out on any stamp duty lol!! In Qld, if a property is sold to a relative, a market appraisal is required for s/d purposes. If a property is sold (with contract) for $100K but valued at $125K, s/d is paid on the higher value NOT the price paid. Also, lots of banks won't give out the valuation done as part of a loan approval process, but a market appraisal from a real estate agent local to the property is all that is required. Yes I forgot to mention, there was a valuation for stamp duty purposes ordered by the solicitor acting for the applicant. Re: Buying a house from Family 6May 23, 2009 5:22 pm Thanks for all the advice. I think that we shouldnt have too many problems as we will not be paying much under market value (if anything), we are first homebuyers so we will have the FHOG&B to use as deposit, and we live in WA and as first homebuyers we are exempt from paying stamp duty. We have to get the house valued as part of the loan conditions anyway, and luckily for me I have a friend who is a licensed settlement agent (we dont have to use solicitors in WA). 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