Gazundered by buyer, but allowance refused by lender

fireloop

Don't know if this is a mortgage issue, but it relates to the sale of our house nonetheless...

Just wondered if anyone might have experienced this and can offer some advice?

We had our buyer pull out on us just before we were about to exchange, then come back demanding a reduction in asking price to continue, which we agreed to.

Things have moved forward and we were due to exchange today, but we've found out today that Santander have refused our solicitors putting the reduction through as an allowance, so our buyer has to continue at the original price (fat chance!) or apply for his mortgage again, which going by Santander at the moment, could take some time.

Our solicitor seems to believe there is no other way around this: has anyone else experienced this, and could offer some advice as to an alternative solution that bypasses getting the lender's agreement and gives our buyer his reduction?

Thanks,

Dave

DVardysShadow

Brown envelope. Or let the buyer sort his problem out and go back on the market. Serves him right.

This is the first time I have seen Santander do something right - there is a fairly obvious route here for a buyer to get a mortgage larger than the property justifies.

Richard_Webster

This is a common problem.

I am forever telling buyers that if they seek a price reduction/allowance - doesn't matter what you dress it up as - lender has to be told and they may well reduce offer.

E.G. Buyer was going to pay £200K for house and getting 90% mortgage - £180K. Leaving costs etc aside buyer has to find £20K. Negotiates "reduction" of £5K = £195K. Lender then reduces offer to £175.5K so even on reduced price buyer now has to find £19.5K but presumably the reduction was agreed on the basis that there was at least £5K of works needed that buyer wants done so actually if the cost of the works is included buyer needs to find £24.5K so it is unlikely to work unless buyer has the extra cash.

So if I am acting for a seller asked to agree a price reduction I would warn them that there is likely to be this delay after something is agreed because the lender will need to be consulted, and also that the whole thing may not work anyway because buyer still may not be able to find the money they require.

This is one of the effects of hardening of lending criteria - that the seller in this case would have to find a buyer who needs a lower LTV mortgage so they can afford to do any works that are needed. Price has to go down until it becomes attractive for someone. Less buyers out there able to afford to proceed with lower LTV mortgages therefore they can force price down.

neverdespairgirl

Richard_Webster wrote: »

Less buyers out there able to afford to proceed with lower LTV mortgages therefore they can force price down.

My personal bee is rattling in my bonnet.

Fewer

CLAPTON

neverdespairgirl wrote: »

My personal bee is rattling in my bonnet.

Fewer

less sugar, fewer bees

bris

Try a reverse premium, get the solicitors to draft up an agreement for x amount of cash, new kitchen for example. Payable to the buyers on completion.

Richard_Webster

Quote:
Originally Posted by Richard Webster
Less buyers out there able to afford to proceed with lower LTV mortgages therefore they can force price down.

My personal bee is rattling in my bonnet.

Fewer

Sorry for bad use of English!

Evilm

We just about managed an allowance of £2k when we got ours for building works that were needed. We were told anything higher would need a new mortgage offer.

I hope you get it sorted.

Richard_Webster

get the solicitors to draft up an agreement for x amount of cash, new kitchen for example. Payable to the buyers on completion.

If the solicitors draft it they have to report it to lender as it still affects possible resale value form lender's point of view.

jill2002

fireloop wrote: »

or apply for his mortgage again, which going by Santander at the moment, could take some time.

All that is needed is a simple retransmission by the advisor and as long as the same loan to value is used - therefore, as the purchase price is reduced, the mortgage amount will be too - there will be no problem. The new offer will be issued to the solicitor either the same day or the following day. Simples.

Richard_Webster

Quote:
get the solicitors to draft up an agreement for x amount of cash, new kitchen for example. Payable to the buyers on completion.
If the solicitors draft it they have to report it to lender as it still affects possible resale value form lender's point of view.

I have had second thoughts about this post.

If the buyer pays the full price and the seller delivers a better house than the lender's surveyor saw and valued at the price agreed (e.g. does some of the repairs etc that buyer will want to get done) then lender can scarcely complain and I don't think the solicitor would have an obligation to report.