Retention on purchase? (Cashback???)

Curiousaboutmoney_2

Hi guys

Sorry to make my first proper post in years a question, but I had a question that no amount of googling seemed to solve!

Basically myself and my OH have finally found our dream home - a little victorian terrace in South East London, which we made a realistic offer on and was accepted. (We offered 5k below the average sold price on the road for the last 12m but the place is in probate and needs a LOT of interior updating).
Sadly..the survey showed structural issues - namely roof strengthening done badly (probably by an LA in 1970s), insufficient load bearing beams and the need to tear down the ceilings and replace. We have spoken to a structural engineer and the estimated cost to repair is around £15k plus the survey and plans at around 2k. We went back to the agent and said we needed to drop our price by 15-20k to compensate, and he suggested an alternative - a retention written into the contract! Basically he said we could write in that the price was staying the same (245) but that we would get 5-7.5k back in cash on completion. Clearly this is preferable for us, because it releases more cash, and preferable for them, as they get a higher price..but it seems too good to be true!! Usually that means it is...so is this illegal in some way? How could the agent suggest it if it is?

Much appreciate any advice people can offer...we love this house and want to go ahead, but we just dont have the cash to do the repair work so this seems like a great option for us!

Thanks!

Curiousaboutmoney_2

Just to add, the valuation came back AT our original offer - ie in spite of the work, the property is still worth what we offered and therefore we are still able to get a mortgage on the full value..this is just apparently the way for the vendor to share the cost of repair without having to go back out into what is a terrible housing market.

Id really appreciate anyones advice on whether it is OK, for these people to basically take the hit on their house price even though it is in fact worth what we offered (and requested as a mortgage) -- apparently if we do the required remedial work it would be worth more than the mortgage...i.e. the work is already semi priced in BUT this market is so poor that the vendor just wants rid at a reasonable price.

I definitely dont want to even go there if this is in any way dodgey! Thanks!!

sp1987

You could get problems with your lender. They will be concerned about the values of the house as a cash incentive (which it is) means the house value is actually lower, so they would be lending over value by a concealed discount. They won't want to lend £245,000 on a house worth 5-7.5k less as it wrecks their security.

Mention to your solicitor as they'll probably have a whinge when the contract turns up from seller saying something they don't expect.

It's more often the case with new homes when the builders offer you say £10,000 'cashback' which really means it's overvalued by (at least) £10,000.

The rest of the issue being the estate agent wants the higher ££ if they charge on % for the sale.