Mortgage offer received but has condition re repairs

santana-mx3

We've just received our mortgage offer for the house we are trying to buy. The lender has made the offer conditional on certain defects found during the survey being rectified. We are quite taken aback at this because we are only borrowing less than 40% of what the surveyor valued the property at. The defects relate to an outbuilding where the surveyor did not consider the workmanship to be to an “acceptable standard”, although he considered it to be functional. This may cost up to 2% of the purchase price to put right if all the surveyor’s concerns are dealt with (and before anyone asks, simply removing the outbuilding is not an option).

Is it normal for lenders to make an offer conditional even when their concerns only relate to an outbuilding and do not put the property and their loan at risk, being non-dangerous and costing a fraction of the equity in the property to rectify?

Also, when an offer is conditional, does that usually mean that the work has to be done before the mortgage funds are released (ie. before completion)?

santana-mx3

Sorry to bump this, but does anyone have any knowledge of these situations? I'd like to find out what other people's experience is re conditional offers before I contact the lender.

Ems*Honie

Hi Santana,

We have a condition that a certain insurance company insures us, they wont do that whilst a garage is standing (movement) I'm now waiting for our mortgage company to agree to knock it down and rebuild it, thing is can we complete before its constructed?

I would be negotiating with the vendor to get the work done between you. Your buying 'as seen' I think , therefore dealing with faults now is only going to benefit you in the long run as you ought to be able to split the cost with the vendor.

I should imagine it at least has to be booked in to be done, although its more likely they will want it completed before they will issue funds. If you phone your mortgage company they ought to be able to tell you.

tifnstav

Your mortgage lender might suggest a retention, that is they keep back a couple of grand and then give you the remainder of the money when the work has been done.
Or you could ask that the Vendor gets the work done at their own expense between exchange and completion, but they might not be too keen to fork out on a property they won't be living at in the future.
Your Solicitor won't really be able to do anything about the conditions on the mortgage offer, you'll have to speak to your lender or your mortgage broker.
Good luck.

safesound

We had a condition on our mortgage which was also considerably less than the total sale price (26% in case anyone is interested), but after many telephone calls we were told that it wouldnt hold up the money. I suggest you ring them and ask to speak to someone higher than the person who answers the callcentre phone, oh and make sure you write down things like the name of who you are speaking to and what time/day you spoke to them as we had trouble with one person saying it wasnt a condition just a recomendation so it wouldnt hold up the money and then someone else saying that it had to be done before they would release *any* funds, and then someone else who said it could be done "at some point in the first year". We just couldnt get a straight answer out of them. They like to give people the run around I think

itsakidsworld

Retaining an amount until proof of work has been completed is a standard practice.

If defects have been found on the property then is it possible to speak to the owner and discuss the situation with them? Tell them that you will ask a builder who you know hopefully, to call and give an estimate for the work to be done. Then negotiate a discount or ask them for the full amount. The builder either does the work prior to purchase so you do not have any mortgage retention or he starts it as soon as you purchase?

Why should you pay the original purchase price when defects have been found?

samspam

I agree with itsakidsworld. You should renegotiate your offer with the vendor. Explain that the survey has flagged up x and that they need to either do the work or take a reduced offer.

hethmar

It does seem a strange point to make about an outbuilding, unless this is to be used for living/business purposes?

And when you are asking for such a small mortgage in comparison to the property asking price???

I would def ring the mortgage company and speak to someone senior pointing out that you are only asking for £xxxx mortgage on a £xxxxx property and that their investment is therefore safe - particularly as this isnt the main house but an outbuilding.

If they dont move then speak to the seller. If this really is a major problem (though on the info given I really cant see why it would be) then it will crop up every time they get a buyer and most certainly wont be seeking a mortgage as low as you are. In that case common sense will tell them better to stick with you and negotiate the repairs than start over again and end up in the same situation.

Once you call the mortgage people it may well be a simple mistake on their part. I know we were once turned down for a mortgage. Couldnt understand it, good credit, never defaulted, both working. Our solicitor rang them and was told it was because my husband was too old for the mortgage. Would you believe that the clerk had noted the second two numbers of his year of birth to be his age making him nearing retirement age rather than in his 30's. Ring them first to see if a similar silly mistake has been made on this.