Buying from brother under market value.

Another question for the experts.
In about 6 months I will be buying my brother out of his share of our 50/50 PPOR.
Unless the market falls the sale price is going to be under market value. I estimate value around 520k based on comparable market sales and my purchase price is going to be 460k. Given I already own half then I will need to pay him 230k.

When all is said and done I will need to borrow a total of 400k including my current loan. Now I am aware I cannot avoid paying stamp duty but are there any other considerations I need to be aware of? How will a valuer and lender see this? Given my estimate values I will be under 80% LVR.

Or is this a fairly straightforward scenario?
 
You'll need to use a lender that will view the purchase as a "favourable" sale and will go off the valuation rather than the purchase price.

Cheers

Jamie
 
Quite a few lenders will lend on this sort of scenario to 80% of the valuation result, which is what it really comes down to.

There are even one or two lenders that will lend as much as 90% if it's a strong application (such as good affordability).
 
I usually make the contract price the market value and you work out the difference between yourselves as a gift at settlement.

Much easier to get a valuation to come up to the market value with a contract at that price rather than hoping the Valuer won't value down to the contract price if it is set just below market.

Also stamps are due on market value anyway.
 
Another question for the experts.
In about 6 months I will be buying my brother out of his share of our 50/50 PPOR.
Unless the market falls the sale price is going to be under market value. I estimate value around 520k based on comparable market sales and my purchase price is going to be 460k. Given I already own half then I will need to pay him 230k.

When all is said and done I will need to borrow a total of 400k including my current loan. Now I am aware I cannot avoid paying stamp duty but are there any other considerations I need to be aware of? How will a valuer and lender see this? Given my estimate values I will be under 80% LVR.

Or is this a fairly straightforward scenario?

Yes - stamp duty must be paid on market value.

If your brother were to go bankrupt in the next 5 years you could have the transaction looked into or unwound - unlikely maybe.

Similar on death and divorce

Implications if you were to ever rent the property with deductibility of interest

If you sell the property CGT consideration if not exempt.
 
Also stamps are due on market value anyway.

How do I calculate the stamp duty under the following situation? The house was originally purchased for 586 and with closing costs it came to 619, so with my half I have already paid roughly 15k stamp duty.

A part I forgot to mention is we are subdividing the land and selling the rear after which stage I will make the purchase from my brother.

So how will this be calculated seeing I have already paid 15k for stamp duty? Would I need to pay another say 13k for the property even though half the size and less valuable than the original parcel?
 
How do I calculate the stamp duty under the following situation? The house was originally purchased for 586 and with closing costs it came to 619, so with my half I have already paid roughly 15k stamp duty.

A part I forgot to mention is we are subdividing the land and selling the rear after which stage I will make the purchase from my brother.

So how will this be calculated seeing I have already paid 15k for stamp duty? Would I need to pay another say 13k for the property even though half the size and less valuable than the original parcel?

The duty prev paid was for each of you to have a 50% share. Now you want to buy the other 50%. So 50% of the duty on the present market value is your new duty cost. OSR will require a valuation and that's how they calc duty. The val would need to be for the residual land being trfd.

This will involve messy CGT issues for the property before you acquire his 50%.You both will have a CGT issue for the subdiv sale.
 
Have you considered a Partition ? It comes with a possible GST issue but that might not be relevant.

Hey Paul,
I Spoke to you on the phone the other day regarding this situation.
We are still going through the process of getting the subdivision through but once that is done I will give you a call before going to market. If you recall our conversation you thought we would only need to pay GST on the sale of the rear property as it was a realization of the asset.
My brother on the sale to me would be CGT exempt as it's our PPOR.

If perhaps we missed something then let me know and I can give you a call sooner before i subdivide.
 
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