Advice wanted/needed! FTb new build

geordie1404

Me and my girlfriend agreed to buy a new build house last oct (2008), we paid £99 which reserved our right to buy an agreed plot to be completed april 2009. We were offered a 5% deposit, and various other incentives which were subject to using the builders financial advisor (said to be independant) when the FA came to see us he told us he covered 100% of the mortgages on the market, we agreed a mortgage application and agreed to provide 5% deposit as well, giving us a total of 10% and he set the ball rolling. He told us that as the mortgage rate was dropping he could keep changing our mortgage with the same company for no extra cost.
The house we agreed to buy was a 3 bed semi for £150,000 (the estate is about 2 years old and when they first went up were going for £170,000.) The valuation report came back and we were told the house was now only worth £140,000 so we went back to the builders and after a week they agreed to drop the price. We exchanged contracts but still hadn't paid any extra money.
Everything was ticking along nicely until a couple of weeks ago, i was on the internet and was looking at mortgages provided by our lender and they had dropped for the first time since we had a mortgage agreed. i rang our FA and he said he would look into it. He then got back in touch and said he couldn't change our rate as the bank wouldn't let him as we hadn't gone direct but we could now go direct with the bank, end all ties with him and still keep all our incentives except the £500 towards financial fees. We decided to go direct with the bank and have been sorting it out this week but they have said they want to go and do another valuation, I understand why they want to do this but am worried that if they come back and say the valuation has dropped again will the builder have to drop the price?
Am i now legally bound to pay £140,000 for a house that might not be worth that, i know i should wait till we get the new valuation back before i worry but would appreciate any advice now?

Many Thanks for taking the time to read this!!!!

poppysarah

Did you also have an independent solicitor?

geordie1404

Yeah my girlfriend works for a firm of solicitors and they are handling it, haven't been able to ask them as she has been off work today and we only just found out about the new valuation tonight when i got in from work and they had closed, will be speaking to them 1st thing monday

SavingSteve

Unless you've exchanged then you can negotiate a lower price

geordie1404

we have exchanged contracts but haven't paid our half of the deposit yet, but if the mortgage company doesn't value it as much as it did in oct then we would be snookered! im thinking the builders would have to lower the price because even if we pulled out and paid the 5% deposit they would still be left with a house to sell that wasn't worth £140,000, or is that just wishful thinking?

Premier_2

(a) There isn't a financial advisor in the land that covers 100% of the mortgages on the market. Some lenders refuse to deal through intermediaries.

(b) The fact he said you could switch deals through him later "with the same company" leads me to suspect he may actually be a tied representative.

You should have been given written confirmation before he offered any financial advice on what he actually was authorised to do as a financial advisor.

(c) why can't he now do what he seemingly suggested to you he could do? i.e. get you a better deal now being offered by the same lender? Has he been sacked or otherwise no longer authorised to act as a financial advisor?

(d) If you do go down the route of getting the property revalued, it could be valued for less which may affect the amount of loan offered. In the event you can't afford it, the builder is under no obligation to reduce the price. You signed a contract and you can be bound by the terms of that contract.

(e) If you fail to complete, the builder is entitled to 10% of the original purchase price. I'm not sure how much you paid as a deposit, but the builder can claim any shortfall from you. You might even find youself liable for any other losses the builder incurs e.g. re-marketing costs, lower sale price, etc.


Why don't you stay with the deal you've got, complete on the property and then take time to assess the situation with regards to remortgaging either with this or another lender?
It's too late to worry about buying a property for more than it's value now. You should have considered that before you put pen to contract.

socrates

This one needs proper legal advice ASAP!

jamesd

geordie1404 wrote: »

we have exchanged contracts but haven't paid our half of the deposit yet ... even if we pulled out and paid the 5% deposit they would still be left with a house to sell that wasn't worth £140,000, or is that just wishful thinking?

Your liability is not limited to just the deposit. It's potentially the whole of any loss the vendor suffers due to your failure to complete at the agreed price. If values have dropped by 25% or 40% that could prove very expensive for you. Often a builder will accept just getting the deposit, but that's their choice, not yours.

So far they have been quite pragmatic with you, recognising that having a willing buyer beats no buyer at all. Taking whatever you can get is probably going to continue to be their best option, so you'll probably be fine.