I own a property with 2 other friends. One of the friends wants to return home to the North of England and the 2 of us left are going to buy her share of the house (a third) and pay her a third of the profit made on the house since we bought it (3 years ago). We are trying to find the fairest solution for all three of us, but we have three areas that we need help in resolving, please help :
1. The boiler has never worked properly and we are not sure if we should get this fixed now (our friend may have already left by the time it takes to get it fixed and paid for) or do we reduce the amount we pay her by what it will cost to fix/replace?
2. Agreeing a price - what is the best way of agreeing to a price for the house? Should we get estate agent valuations and take an average, or is taking an average of similar properties in the area (by looking at local estate agent websites and newspapers) a better bet?
3. Obviously when the two of us come to sell the house in the future we will incur estate agents charges - what is a fair percentage or fee we should take off the amount we pay for the third share in the house? What is the average estate fee 1% or is it more?
Any help in these areas would be greatly appreciated as we don't have much time to get this sorted.
Shouldn't all of this be done formally, through a solicitor? Didn't you draw anything up at the time of purchase? Things like this would really put me off buying with friends - £ causes more fights and resentment than anything else.
I wouldn't think it was fair to ask your friend to pay for boiler repairs if it has never worked properly in the time she has been there.
You could look at www.nethouseprices.com to see what similar properties are going for at the moment - should give a more accurate picture than an estate agent.
Not sure about estate agent fees, usually between 1 and 2% I think. There will also be solicitor fees on top of that.
2. Agreeing a price - what is the best way of agreeing to a price for the house? Should we get estate agent valuations and take an average, or is taking an average of similar properties in the area (by looking at local estate agent websites and newspapers) a better bet?
The trouble with all the above is that you'll only get asking prices, and at the moment sale prices are around 6-7% below asking prices (and some houses never sell at all). You could pay an estate agent for their opinion on how much it'd sell for (as opposed to a free valuation which will likely be optimistic especially as they'll be trying to get your custom), but if you want to save money try nethouseprices.com and find similar houses in your area and what they sold for recently.
Good luck! I hope you all keep smiling and stay friends
Did you buy as joint tenants or tenants in common? I would imagine the latter, and the agreement/conveyance should give guidance as to what to do. You really must do it properly using a solicitor though as you need to formally sever the tenancy
Just a non-infomed opinion about the other questions: I don't think it's fair to deduct boiler repair costs and I'd get a few estate agents round and go by their valuations to decide a fair price.
As rach_17 indicated, the problem with getting local agents to carry out free valuations is that they only provide this service when they think there's a new instruction in it for them and even then they will tell you what you should put it on the market for not what you should expect to actually sell for. The best option (but one which incurs a cost unfortunately) is to get a couple of agents to carry out paid valuations and take the average (this is what my recently divorced friend did in relation to the former matrimonial home). That way you will have proper evidence relating to your property (as opposed to others in the area that may not resemble yours at all)and a realistic selling figure rather than an optimistic marketing figure. The former approach will favour you (and is the fairest) whereas the latter approach will favour your departing friend!
The best and ultimately fairest solution would be to sell the property and share the proceeds. This will prevent any dispute as to the true value and enable you and your remaining friend to rent and save money while prices continue to fall back to affordable levels.
Thanks for the replies, it's very helpful. In hindsight we should have drawn up an agreement, but we didn't and now have to sort this out so it can be as fair as possible to every-one. With regard to the boiler, I should have said that the boiler worked fine when we moved into the house, but in the last 12 - 18 months it has failed and we have haven't found any-one who can fix it or give us a solution to the problem - other than replacing it. I'm very grateful for the feed-back and I'll print out the post to give to the others :-)
If you're going to get the estate agents to do a professional valuation, and solicitors to draw up your agreement, this will probably start adding up to the fees that you would have spent on an estate agent, so I'd suggest sharing those between you rather than reducing the price by what you would have paid an estate agent.
Knowing how expensive legal proceedings can end up being and knowing how often situations like this can turn nasty (I'm an ex legal secretary) my suggestion would be that you keep it as simple as possible.
My recommendation would be that you get three estate agents to do a free valuation and if all three come in with similar figures, take the average and pay your friend one third of that figure. Also agree that the legal fees and other costs will be split three ways. Splitting hairs over things like boiler repair, future estate agents' fees, etc, will just mire you down. For example, if you ended up selling in the future without needing to use an estate agent, would you have an agreement in place to pay her back the amount you deducted from her share of the house?
While you are doing all of this, get the paperwork sorted out so far as you and the friend you are staying with is concerned. You should have a properly drawn up contract to cover exactly this eventuality, plus all the other things that might crop up in the future. This shouldn't be too problematic as you will be having to change the mortgage anyway so that your friend who is leaving can have her name removed.
