Property swap? Or alternative solution?

S

sm7940333

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HI all. Looking for feedback on proposal involving swapping properties with my in-laws:

  • The Plan: My in-laws want to purchase a downsized property & sell their current PPR to fund it & free up some equity. We in turn, want to purchase the in-laws PPR & sell our PPR. The sale of the in-laws PPR funds the purchase of the downsized property.
  • The Reality: My in-laws have identified their ideal downside property. However, the auctioneer seems to have preference for a purchaser not involving a chain & has not accepted a bid from my in-laws. To be transparent, I have not been involved in conversation between my in-laws & auctioneer. We’re reading between the lines…
  • Question: To break the chain / accelerate the purchase to address auctioneers perceived concern… Could I buy the ideal property for my in-laws (with cash & small mortgage) and then swap properties with my in-laws along with paying $250k? To be clear, I purchase their €650k PPR with the combination of €250k & the downsized property valued at €400k.
  • Alternative solution: Or are there other ways to make this work? Eager to hear different perspectives.

Additional Background:
  • My aging in-laws want to downsize and stay in the locality. They are looking for a bungalow that is walking distance from town centre. There are few properties that meet that requirement & even fewer that come up for sale.
  • We are keen to purchase my in-laws PPR. Suits our growing family needs with more space inside & outside. We live close to them. However, it will require a lot of work (extension & significant energy upgrading). This will require $ & time.
  • If we purchase our in-laws PPR, we can afford to wait to sell our PPR so we can get work done on my in-laws house. But I appreciate that does expose us to a downside risk if there is a housing downturn. So we may just try to sell as quickly as possible to reduce that risk & do the work while we live there.

Numbers:
  • In-laws PPR is valued at €650k. No mortgage.
  • My PPR is valued at €575k. No mortgage.
    • We are mortgage approved for €650k.
    • We have €150k in cash. We also have €65k in shares that I can sell now & will have €45k in shares that I can sell over coming 2.5 years.
    • Joint income nearly €200k gross.
  • In-laws target property valued at €400k.

I’ve posted on here before & took the advice to find another solution which is why we landed on the above proposal tax implications of a property gift | Askaboutmoney.com - the Irish consumer forum
 
It sounds complicated.

How about:
You and your wife give your €300K cash to in-laws in an interest free loan fully drafted up and signed. Should be relatively fast to organise and arrange.
They are now a cash buyer and can bid on the bungalow, hopefully get it and move in.
You purchase their house with your pre approved mortgage and complete sale.
You get your €300K cash back, do your renovations, move in and sell your own ppr.
 
Clamball, where are you getting the €300k cash and how is that enough to buy a house for €400k?

Am I misreading it?

SM has €215k cash and house is €400k so there is a shortfall of almost €200k. The in-laws won't get a normal mortgage, so that is out.

Brendan
 
Am I missing something else here?
You and your in-laws go into your solicitors tomorrow and exchange contracts for you to buy their house for €650k.

The auctioneer should accept such a deal as the equivalent of a cash buyer.

Brendan
 
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You don't give your parents age.

The home is worth €650k. They could get a fixed rate lifetime loan from Spry Finance

I can't find the percentages anywhere, but, if they are 70, they would get 25% of €650k or €160k. (If they are 80, they would get over €200k.

If they are 70, they now have €375k, so they are getting close.
If they are 80, they have €430k.

Downsides
There are early repayment fees if they repay the loan when they sell the house to you. But I think that they are capped at 2%.
the interest rate is high but not a huge issue if it's only for a year or two.
 
sm7940333 said:
If we purchase our in-laws PPR, we can afford to wait to sell our PPR so we can get work done on my in-laws house. But I appreciate that does expose us to a downside risk if there is a housing downturn. So we may just try to sell as quickly as possible to reduce that risk & do the work while we live there.
Click to expand...

This is also workable.

You will end up with an additional stamp duty of 1% and an additional set of legal fees, but so what? They are immaterial in the overall context.

You can easily handle the risk of a housing downturn so again, you should not worry about it.

Brendan
 
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sm7940333 said:
To be transparent, I have not been involved in conversation between my in-laws & auctioneer. We’re reading between the lines…
Click to expand...

It seems that you are getting very involved in this so you may want to get involved fully in the negotiations. If the solution is that you buy it, then your in-laws should drop out and you replace them.

Brendan
 
Brendan Burgess said:
You don't give your parents age.

The home is worth €650k. They could get a fixed rate lifetime loan from Spry Finance

I can't find the percentages anywhere, but, if they are 70, they would get 25% of €650k or €160k. (If they are 80, they would get over €200k.

If they are 70, they now have €375k, so they are getting close.
If they are 80, they have €430k.

Downsides
There are early repayment fees if they repay the loan when they sell the house to you. But I think that they are capped at 2%.
the interest rate is high but not a huge issue if it's only for a year or two.
Click to expand...
Have been through this process with Spry last year. There are no early repayment fees if you sell your home and choose to downsize at a later date.
 
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