As a means of providing financial support to a relative, a way of keeping a beloved property “in the family” or for any other related purpose, selling your house to a family member below its fair market value can be a great idea.

Property is, of course, one of the best assets in terms of value preservation.  As a means of providing stability for the future, offering a family member a house at a discount is a kind act that provides you with a little financial remuneration while helping them get onto the ladder.

But is it possible to do this? And if so, how low can you go when deciding on a price?

Here at Property Solvers We Buy Any House service, our consultants are regularly asked these questions.

Below, we’ll explain how you can move forward with such a plan…

Can You Sell a Home Below Market Value to a Family Member?

It is absolutely possible to sell houses below market value in the UK.  This can be to whoever you want. 

If there is no mortgage on the property at all, then things tend to be easier.

You can sell your house to a family member for £1 if you want to – but no less. This is because cash needs to change hands.  If not, then no legal contract of sale can be put in place.

Other times, people use the money from a house sale as a gift to a family member.

It’s worth noting that if the relative to whom you are selling requires a mortgage to purchase the property, they may need to spend a little time carefully researching lenders.  Some do not like to involve themselves in transactions between family members.

You also need to be aware that if you sell a house to someone you know below its fair market value, the difference between that fair value and the agreed price constitutes a “gift” in the eyes of HMRC.

This means that Inheritance Tax (IHT) may be payable on that difference if it exceeds the annual exemption and if you die inside of seven years after the sale is complete. There are likely to be Capital Gains Tax (CGT) implications too.

How to Sell a House to a Family Member Below Market Value – With a Mortgage

If you are currently paying off a mortgage on the property you wish to sell, you’ll come across additional restrictions and regulations.

If the mortgage is still in place at the time of sale, UK law states that the property must be sold for at least the outstanding mortgage amount. This is in order to satisfy the requirement for the mortgage to be “paid off” before the home changes hands.

Alternatively, a loan may need to be taken out to cover the outstanding amount – though this may lead to financial difficulties down the line.

Instead of taking this route, you might decide to pursue a lease option instead.

How to Sell a House to a Family Member Below Market Value - With a Mortgage

Lease Options (Legally Transferring Property to A Family Member)

A lease option is an agreement whereby an individual rents the property from you for an agreed period.

At the end of that period, the tenant (in this case the family member) will automatically be given the option to purchase the house.

Usually, a percentage is added on top of the tenant’s (family member’s) rent.  This can be used as a gradually accumulating “down payment” on the property. There is usually a fee to “purchase” the option as well, although this can be as low as £1.

Lease options are extremely useful for people struggling with low or negative equity.  They’ll also enable you to arrange a set purchase price that does not rise with market inflation.

As long as you: 

  • Are aware of the restrictions that exist for those attempting to sell mortgaged houses below market value in the UK;
  • Understand the Inheritance Tax (IHT) and Capital Gains Tax (CGT) implications of selling any property for a very low price;
  • Realise that some mortgage lenders will be hesitant to lend in such circumstances.  However, as long as you can prove things are above board, things should be fine.

You may still decide that a direct sale of this kind is still the best route for you.

However, a lease option may serve as something of a safety net in certain circumstances.  It can also put both you and the family member to which you are selling in a much more favourable position, both tax-wise and in terms of the wider market.

Lease Options (Legally Transferring Property to A Family Member)

Selling a House Below Market Value

The above information should give you a little clarity on the things to consider when preparing to sell a property for below market value to someone from your family.

You may be reading this as a homeowner looking for a quick sale.  If this is the case, Property Solvers can help.

We’ll provide you with a free upfront cash offer for your property – and the process can be completed within 7 days with 0% fees.

The trade-off is that the property is sold at up to 75% of its market value. We also pay all legal fees and, as it’s a private sale, you’ll avoid the fees and hassles that come with using an estate agent.

However, if you can work to longer time scales, we also have auction (and estate agency) options where our clients achieve 90% to 100%+ of the market value.

To learn more about our quick home buying arrangements, contact Property Solvers today. We’ll be happy to assist you…