As the trend towards multigenerational living gains ground, young adults are now not only moving back in with their parents but increasingly buying the homes they grew up in from their parents, with the intention of also raising their own families there.
“This is consistent with the fact that many first-time buyers are now in their mid-30s and seeing their parents get close to retirement just as they prepare to settle down,” says Berry Everitt, CEO of the Chas Everitt International property group. “Buying your childhood home is not a decision that should be taken for emotional or sentimental reasons, or executed hastily. Lifestyles have changed so you need to think clearly about whether this is really your ideal home.”
The property checks
Prospective buyers need to consider the location of the property just as you would when looking at any other home. Think about whether it is close enough to work and/ or if it offers access to reliable public transport. Does it have all the shops, schools and other amenities that you need? Is it safe, or would it perhaps be better if you all moved to another home in a more secure area or development? These are all factors Everitt suggests you evaluate before making the purchasing decision.
You also need to evaluate the condition of the property. The fact that your parents are senior citizens may mean that there are some ‘deferred maintenance’ issues. In order to avoid the possibility of family disputes later you will need to identify these and reach agreement about who will do the work and who will pay for any repairs that may be needed – before you buy.
It is also important that you keep the potential resale value in mind, as you would do with respect to any other home. For example, if updates or alterations are needed to make the house work for your extended family you will need to be careful not to overcapitalise and not to limit the appeal of the property for future buyers.
The personal checks
At the same time you will have to establish whether you can afford the property and how you will finance the purchase. “The biggest obstacle for most first-time buyers is the deposit, and your parents may be willing to help you with that, but then you must agree on how you are going to pay it back – especially if the loan came out of their retirement funds,” adds Everitt.
Similarly, you will need to agree on a fair purchase price, bearing in mind that if your parents set price that is too far below market value in an attempt to help you qualify for a loan, the SA Revenue Service could view the transaction as an attempt to avoid paying transfer duty.
You will also need to qualify for a home loan in the usual way, as the banks can’t make any allowances for the fact that it’s your parents’ home you are buying. In other words, you will need a good credit record, steady employment and enough discretionary income to afford the monthly bond repayments.
Then finally, and perhaps most importantly, you should think carefully about whether everyone in the extended family you are creating will get along, find out how any other members of your family who live elsewhere feel about the arrangement, and try to plan ahead for any change in your circumstances.