Selling house privately to a friend

Your home has tremendous value, but when the time comes to sell, a decision must be made about who you sell it to. Despite being somewhat against the grain, selling to a friend or family member is a thought that crosses the minds of many homeowners.

While it may seem like a useful way to save time, effort, and cash, selling your house to a friend isn’t something you should jump into willy nilly. Business and pleasure are often kept separate for a reason, and many friendships have been ruined as a result of their mixing.

Let’s take a deeper dive into the business of selling properties privately.

What does selling a house privately mean?

To sell a property privately is to sell without the services of an estate agent. In other words, you aren’t paying an experienced property expert to market and sell your house.

So can I sell my property without an agent?

Yes you can sell your house without an estate agent, but it can be a lot more hassle! You need to do all your own property advertising, vet buyers, host viewings, negotiate a deal, and manage the property chain.

But if you have a friend who’s eager to buy your home, you might be in a better place to do it! You'll still need to employ a conveyancing solicitor to iron out the paperwork, but that’s most of the hard work done...right?

If everything works out, you will…

1. Save time and effort on finding a buyer
2. Save money on agency fees
3. Sell your home and make your friend happy

Unfortunately, selling property isn’t a straightforward process, and selling to a friend less so. If you’re thinking about doing it, there’s some things you should watch out for.

Six things you need to know about selling to a friend

1. Your friend’s offer won’t lead to a bidding war

If you agree to sell to your friend, there will be no outside offers to stimulate the final selling price. This lack of bidding means one thing - the price you and your friend settle on is the price you get.

A typical homeowner could save on agent fees by selling privately. But by selling privately, they also miss out on potential buyers - and fewer buyers means lower offers. With a good agent, you could sell for your property’s asking price, and make more than the money you might have saved in the agent’s fee.

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2. Your sale is based on friendship rather than merit

In a traditional sale, a real estate agent vets potential buyers and relays their respective offers to the seller. In a private sale, you lose the agent’s process to find suitable buyers. As such, your friend might be a good friend, but a bad business partner - and some home sales have been compromised because sellers didn’t hold their friends to a higher standard.

For example: you plan on selling to your friend and moving to a new property. This ‘chain’ is reliant on your friend buying your property in time for your move - but they’re unable to find a suitable buyer for their home.

There are a number of reasons why this might have happened. As mentioned previously, your friend might be a buyer you wouldn’t usually trust in a business transaction. Or, perhaps not wanting to pester a friend, you may not have encouraged the sale as much as you should have.

Regardless of the reason, it’s ultimately your friendship that facilitated these compromises. And where the sale of your greatest financial asset is concerned, there is no room for compromises.

3. Your sale may involve concessions

In legal terms, selling to a friend is what’s known as a non arm’s length transaction. As opposed to arm's length transactions, where parties involved are unknown to one another, non arm’s length transactions are where the parties involved had, or have, a previous relationship.

While a non arm’s length transaction is not of itself an issue, the types of concessions made with such deals could be.

You may have to compromise on your own property purchase because your friend hasn’t been ready to move forwards with theirs. By selling without an agent, it’s likely these concessions will build.

If one of these concessions is price, you need to be aware of the tax implications of selling your home below market value.

HMRC looks at the objective value of properties when selling rather than their sold prices. As a result, if you sell a high value property to your friend for a price that is far below market, this may be seen as an attempt to avoid Capital Gains Tax, Stamp Duty Land Tax and Inheritance Tax. You could be made liable for these taxes or fines.

4. Having a property survey is super important

It’s imperative that you instruct an inspector to survey your home for any major safety hazards. Friendships have been ruined for much less. Ensure that you order a thorough home inspection that will give both you and your friend confidence that there’s no potential for problems later on.

5. Make sure your friend is approved by their mortgage lender

Assuming your friend is buying your home with a mortgage, it’s best to receive some indication that their lender will approve their application. Let them know you expect an Agreement In Principle (a mortgage pre approval) before the sale can go ahead. You need to be sure that your friend can afford the purchase price. Your own move depends on it after all.

6. Keep on top of everything

Even after your friend’s mortgage has been pre approved, without good, local agents onside, you’ll lose a lot of sage help and advice. They are absolutely essential in managing the property chain and keeping all parties motivated. They are also useful with progressing the sale. They’ve sold houses a hundred times over, in many different states of the property market, so they know what step needs to be taken and when.

Ultimately, any chain involving a private sale is a bit more risky than usual. That’s why it’s important to keep on top of everything - instruct a reliable conveyancer, choose the right surveyor package, order all those checks, and get the deeds changed at the Land Registry.

Do you need a solicitor to sell a house privately?

Technically, you don't need a solicitor to sell your house, but you might struggle without one. Selling privately nearly always involves a property chain. When contracts are exchanged, solicitors contact each other across the chain to seal the day and arrange a day of completion. They also take care of all of the paperwork that needs to be completed. All in all, they are vital for any property transaction.

Do you need an EPC to sell a house privately?

Yes, you need an Energy Performance Certificate to sell a house privately. They're a legal requirement for selling or renting out your property. Have an EPC assessment done before you put your house on the market to avoid being fined.

What documents do I need to sell my house without an agent?

To sell your house without an agent, you’ll need the following documents to hand:

• A proof of identity and address like your passport or driving licence
• The title deeds to your property (Check the Land Registry)
• Energy Performance Certificate (Check if you have one here)
• Share of freehold information
• Property information forms like TA6 and TA10
• Safety certificates (Gas and electric)
• Leasehold information pack if you pay any service charges like Ground Rent

If you haven’t got a friend to sell to, you’ll also need to take photos and draw up a floor plan to market your property successfully.

Do I have to pay an estate agent if I sell privately?

It depends on the agreement you made with the estate agents you’ve instructed. Some contracts outline a specific amount of time an agent can be the sole seller of your property - meaning that even if you find a buyer, you’ll still need to pay their commission. Check the terms of your contract carefully.

Summary: It’s better to be safe than sorry

When handling your greatest financial asset, especially where your immediate family and livelihood are concerned, it’s better to be safe than sorry.

While it is possible to sell your home to a friend, it isn’t the recommended course of action. The risks are many, and the benefits, few and far between.

For the majority of homeowners, the best chance at securing a successful and beneficial home sale is by choosing the right local estate agent. Use the expertise and skill of a trusted property expert to discern the right buyers, and pick a credible offer.