Buying out sibling from inherited house & FTB status

G

gnubbit

Registered User
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Hi all and Happy New Year.

I've searched but couldn't find anything on this.

Could anyone tell me what the situation is if 2 or more siblings inherit a property from a parent and one buys out the other(s)? Does this affect the first time buyer status of the sibling buying out the others? Are there any tax and stamp duty implications?

Also, what is the best way of determining a fair value for the house?

And would one apply for a mortgage in the usual way (based on multiples of income)?

Thanks,
G
 
It is a simple straightforward business transaction. If you all approach it in that way, it will make everything simpler.

"Does this affect the first time buyer status of the sibling buying out the others?"

Yes. But it might be possible for one person to waive/disclaim their interest so that the other inherits- although when there is consideration passing, this probably will not work.

"Are there any tax and stamp duty implications?"

Probably stamp duty but will depend on the value passing.

"Also, what is the best way of determining a fair value for the house?"
You will need a written valuation for stamp duty - get a local auctioneer or if you don't agree on the value, get three and take the mean average.


"And would one apply for a mortgage in the usual way (based on multiples of income)?"

And also that there should be substantial equity in the property i.e. because the borrower already owns a share.

mf
 
Hi and thanks for your reply.

The situation is 2 "children" inheriting the family home from their parent. Each share of the house is worth about 400K - 450K. There are no other significant assets, perhaps a small amount of cash.

Could you tell me a bit more about the stamp duty situation? The sibling buying out the other is a FTB so I thought they might be exempt from stamp duty? If the value is less than the CAT threshold are they tax-exempt or are there any other applicable taxes?

Am I understanding you correctly that if they buy out the other, then that is considered as buying a property and consequently they lose FTB status?

Would it be necessary to use a solicitor for conveyancing or is inheritance (and the buyout) simpler than normal house purchase?

Thanks,
G
 
"The sibling buying out the other is a FTB so I thought they might be exempt from stamp duty? If the value is less than the CAT threshold are they tax-exempt or are there any other applicable taxes?"

From Revenue website:

Can I avail of first time buyer relief if I previously received a gift of a house?
The relief can be claimed where the gift of the house was received prior to 22 June 2000 (or prior to 27 June 2000 in the case of part of a house). A gift received after the above date(s) is regarded as a prior purchase and would preclude a person from claiming the relief.

I honestly do not know how Revenue would treat this situation. They may regard the FTB was an FTB as it is part of the same transaction or they may say FTB used up FTB status on inheriting their share and therefore lose it for the subsequent purchase. Specific technical advice required from a good Tax expert.

"Am I understanding you correctly that if they buy out the other, then that is considered as buying a property and consequently they lose FTB status?"

After the situation ( whatever about during it) the FTB has definitely lost the FTB status.

"Would it be necessary to use a solicitor for conveyancing or is inheritance (and the buyout) simpler than normal house purchase?"

You will need a solicitor. Property transactions like this are too complex to attempt on your own. You could try it but as Vanilla recently posted:

If there are no mortgages involved then you can sell and transfer to your sister without a solicitor. You just need to draft the contracts, answer objections and requisitions on title, make sure the title you offer to your sister is in order, as is the planning and building regulations, ensure all taxable events are covered by way of clearance or payment of the relevant tax, draft the closing documents, the transfer deed and give them to your sister. Then she needs to obtain searches, make sure they are clear, stamp and register the deed. Oh and it had better all be done right cause if she ever needs to mortgage the property or resell it chances are the next purchaser or their bank will be making sure all the title and documents are in order other wise they will not buy or give a mortgage. So if you think you can do it there should be no problem."

mf
 
As regards the FTB stamp duty situation - if the sibling who is buying out the share in the house has not previously purchased or built a house at home or abroad then they would qualify for First Time Purchaser exemption on that transaction, - but of course they would then have used up their FTB status for future purchases. Also as and from 31/3/07 the FTB exemption has no limitation as regards the cost of the house.
 
hi i am in that situation right now with my sister where we have both inherited our grandparents home-we have larger tax implications being grandchildren but we are considered both first time buyers.... we are selling the property-(worth about a mil) mainly to pay the tax which is around 90 grand each...and we cant afford(nor do we want to actually)buy each other out but we are both considered first time buyers,and my solicitor told me that....we are currently putting it on the market and only have til feb to pay the tax-could be some leeway with the date because the deeds were not in our name after probate but after that date we have to pay a 1% interest till it is sold!....

myself and my sister are not close or on speaking terms,but we deal with everything through solicitors anyway... but im interested to see how it develops because i may want to accept an offer and she may not-things like that but hopefully within a few months it will all have sorted out and we will both move on....

i am going to invest my share for a while-after i pay off all my debts and then buy property when i realise where i want to settle,because i wont want to buy again after using the first time buyer option up.....ta x
 
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