Need some help on exchange of contracts and deposit please!

dz6kb4

Hi all,

I recently reserved a new build off plan for 150000 and have secured the mortgage and have a deposit of 20%.

I have recieved the contracts from the solicitors and the amount I have to pay on exchange of contracts is 33k. This is the full deposit plus mortgage arrangement fee that I wanted to pay upfront and the solicitors fees.

Is it normal to pay all the deposit at the exchange of contract stage? The reason I don't want to do this is because the property has still not started to be built even though when I eserved the developers said it would be finished at the end of this year.

Therefore, I'd be signing a contract when I cant see a completion date in sight and if it is along time, I'm loosing interest on the deposit money that I could be keeping in my bank.

Is there anything I can do to hold off signing the contract or at least hold off on paying the full 33k?

Thanks for any help you can offer.

DVardysShadow

dz6kb4 wrote: »

I have recieved the contracts from the solicitors and the amount I have to pay on exchange of contracts is 33k. This is the full deposit plus mortgage arrangement fee that I wanted to pay upfront and the solicitors fees.

Too early to pay solicitor's fees.

Is it normal to pay all the deposit at the exchange of contract stage? The reason I don't want to do this is because the property has still not started to be built even though when I eserved the developers said it would be finished at the end of this year.

Therefore, I'd be signing a contract when I cant see a completion date in sight and if it is along time, I'm loosing interest on the deposit money that I could be keeping in my bank.

Worse still, if the building does not complete in a timely fashion, you may find that house prices have fallen, your mortgage offer is no longer valid or reduced and you are unable to buy the property, at which point the builder may just sue you to complete. It is not unknown.

Ulfar

You didn't use the solicitor recommended by the builder I hope.

You need to get your solicitor to insert a long stop date and not leave the contract open ended. Be mindful that your mortgage offer will also normally be time limited.

Do they not have any completed properties on the development ?

dz6kb4

Thanks for your reply on the solicitors fees Shadow. I didnt need to read your other points however as they are obvious. I could die tomorrow, can just as easily happen. I knew all that when I reserved the place but what I don't know are details around the exchange, completion...

Thanks Ulfra. of course I didnt use the developers solicitors Good call about the sto date. Does that tie the developers to meet a completion date?? My mortgage offer runs out July 2010.

Yea, there are loads of of completed properties, I think mine is one of the last to be built aswell as a supermarket and some shops..

any other help on this?

Ulfar

Inserting a long stop date in the contract means that if the developers don't complete then you get all your money back and don't buy the property.

This will avoid you being in the situation that a lot of others have posted on here where their mortgage offer has expired but the developer hasn't finished the build. Some of these have then been unable to get finance as the values of the properties have dropped or because banks have tightened up their lending on new builds.

I don't think you have any hope of them finishing this build by the end of this year from your posts. Also I am quite surprised that your mortgage is good till July 2010, you may want to double check.

Richard_Webster

Normally at exchange, particularly when there is any period between exchange and completion, a solicitor would only want the 10% deposit, which in the case of a new build would normally also be reduced by the amount of any preliminary deposit given to the builder at the start.

Are you sure your solicitors really want the whole balance plus costs etc now? I always make a practice of telling clients how much I need to exchange and then the total amount I will need later, so that they can check they have done their sums correctly.

There's been a recent thread where someone had a mortgage offer on another proeprty and then got one on the house they ended up buying but didn't notice until after exchange that the amount was less than they expected! So giving the figures pre-exchange enables a buyer to make sure that the total amount he will have to find is as expected!