Can I Sell My House Below Market Value

Yes, you can sell your house for less than its market value in the UK, but there are important legal, financial and tax implications to consider. Whether you are transferring the property to a family member, making a quick sale, or helping someone get on the property ladder, selling below market value is entirely legal. However, it must be done properly to avoid issues with mortgage lenders, inheritance tax, stamp duty, or accusations of deliberate undervaluation.

This guide explains how you can sell your house for less than its market value, who it might apply to, and what the risks and rules are when doing so.

What is selling below market value?

Selling below market value means agreeing a sale price that is lower than the property's estimated open market value. The market value is typically determined by a local estate agent, a surveyor, or a mortgage valuation. If your house is valued at £300,000 and you choose to sell it for £250,000, you are selling at £50,000 below market value. This is sometimes referred to as a concessionary sale or a discounted sale.

It is a fairly common practice within families, where a parent may sell a house to their child at a discounted rate, or between close friends or landlords and long-term tenants. In other cases, a homeowner may sell quickly below market value to avoid repossession or secure a faster sale in a slow market.

Who can you sell to below market value?

You can sell to anyone below market value, but it is most common in family transactions. If you are selling to a friend or relative, especially for significantly less than the market value, the buyer’s solicitor and mortgage lender will want to know the details. This is because the discount may be seen as a gifted deposit, which has implications for the buyer’s mortgage offer and affordability assessment.

It is essential that both parties have independent legal advice to avoid disputes or claims of undue influence, especially in family arrangements. Mortgage lenders usually require written confirmation of any gift or discount, as it changes the equity and risk profile of the purchase.

Tax implications and legal considerations

One of the key risks in selling below market value is the potential impact on taxes. If you are gifting part of the property’s value to a relative, it may be treated as a gift for inheritance tax purposes. If you die within seven years of the sale, the discounted amount could be brought back into your estate for inheritance tax calculations.

Capital gains tax could also apply if the property is not your main residence. Selling below market value does not exempt you from tax on the theoretical gain. HMRC will base their calculation on the market value, not the sale price, when working out any liability.

For the buyer, stamp duty is usually calculated on the actual price paid, unless the transaction is between connected parties, in which case HMRC may use the market value instead. It is important to seek advice from a solicitor or tax adviser to understand how stamp duty will be assessed.

Can I sell at a loss in the open market?

If you are not selling to a family member but simply want to accept a lower offer to sell quickly, that is entirely your decision. Many sellers reduce their price to avoid delays, avoid repossession, or offload a property in a declining market. However, if the property has an existing mortgage, you must ensure the sale price is enough to clear the outstanding debt, or seek the lender’s permission to sell at a shortfall.

Selling at a loss does not usually result in tax relief unless you are a company or property investor. For private individuals, losses are not deductible against future capital gains. If you are in financial difficulty, it is important to discuss your options with your mortgage provider and solicitor.

Risks and protections

If you sell significantly below market value without proper legal advice, the transaction could be challenged later. This may happen if another family member feels unfairly excluded or if creditors believe the sale was intended to shield assets from recovery. In cases of bankruptcy or divorce, past transactions at undervalue may be investigated by the courts.

To avoid these problems, always document the reasons for the discount, ensure both parties have independent solicitors, and make sure the paperwork clearly reflects the agreement. Valuations should be recorded and disclosed where necessary, particularly if there is a mortgage involved.

Conclusion

You are legally allowed to sell your house for less than market value, whether to a family member, a friend or an unrelated buyer. However, it is important to understand the legal and financial implications, especially around tax, mortgages and stamp duty. To protect everyone involved and avoid disputes or future challenges, always take professional legal and tax advice and ensure the sale is handled transparently and in accordance with UK property law.