Been asked to remove "offer subject to mortgage" from our offer

Red_Arrow

First of all I'm based in Scotland, so please keep that in mind when answering.

We made an offer on a repossessed property as has one other party. The property went to a closing date which has now past and we've been told that we're the highest bidders. But the creditors have countered our offer and said they want to exclude the "offer subject to mortgage approval" clause in our offer. Basically saying (from my understanding) that we can't back out even if the bank don't end up lending to us.

The other party has made a cash offer but we understand it's a few thousand less. Of course they don't have to worry about this clause as they have the money already.

What would happen if we accepted their counter and didn't get the mortgage, am I correct in saying it's legally binding and we have to still stump up the cash? I will speak to our solicitor tomorrow morning but just wanted to see if anyone here has experienced this before.

Just really annoying as we have got our mortgage agreement in principle and 99% sure there will be no issues getting the mortgage but we just don't want to take any risks. Such a horrible way to end up losing out on the property we really wanted.

I'm starting to suspect that the creditors want the cash offer so are trying to scare us off.

Is the solicitor able to fight for us and try and explain to the creditors that we're a low risk since we both have good credit, savings, professional jobs and the agreement in principle?

theartfullodger

Talk to your Solicitor: I'd be very unwilling to change my offer if I needed the mortgage...

Who did you get the request from, the selling agents?? I'd want that in writing - they might just be trying to push you.. Think I'd also go tell them all the other reasons why I'm a great buyer (some or .. hopefully..) - nowhere to sell, solicitor lined up, deposit in bank, offer in principle, support Bhoys/Gers just like they do etc etc etc....)

Another home will be along if you miss this one...

Good luck!!

Red_Arrow

It was the creditors who are selling the property on behalf of a bank that countered the offer with our solicitor. Our solicitor then contacted us, so I'm not sure in what form the request came in.

We will not be moving on that condition, no way will we be taking a chance and end up with a property and no way to pay for it.

I will speak with our solicitors tomorrow morning and suggest they go back and show that we're a good buyer.

But again I suspect the creditors want to go with the lower cash offer to just shift the property, and probably meet some targets, instead of going with our higher offer.

ValHaller

In England, I would happily remove the mortgage stipulation, but remain 'subject to contract'. So the question is, for Scotland, would the offer be contractually binding if it were unconditional? And can you get surveys done now, or do you have to go unconditional in order for this seller to permit a survey?

YoungBaker

You aren't contractually obliged to anything until you sign the missives.

We had a similair experience and were worried about offering on a property, but ultimately there is no other way to do it. You need to put in your offer and then try and get the mortgage. If and when they accept the mortgage there is a process of to and fro'ing anyway to get the final terms and conditions of the offer ironed out from the solicitors, which should give you time to get your mortgage in place.

Just because you are offering on a property with closing date it doesn't make it any different if you were to go out and find a property and just put an offer in. Either way you are at equal risk of an offer being accepted and obviously you haven't got a mortgage in place.

Until you agree to sign a missive, you are in no way contractually obliged to anything.

see - http://scotland.shelter.org.uk/get_advice/advice_topics/finding_a_place_to_live/buying_a_home/finalising_the_sale

Once the missives are concluded, the contract (or bargain) becomes legally binding. Now neither you nor the seller can withdraw from the contract or vary the terms at all, unless the other party agrees or there is something in the missives that allows you to do so. Even if the property burns to the ground, you will still be legally bound to go through with the sale. This is why it's very important that you have a formal mortgage offer by this stage: if you can't afford to pay for the home, the seller can take you to court.

ValHaller

al_1232 wrote: »

You aren't contractually obliged to anything until you sign the missives.

We had a similair experience and were worried about offering on a property, but ultimately there is no other way to do it. You need to put in your offer and then try and get the mortgage. If and when they accept the mortgage there is a process of to and fro'ing anyway to get the final terms and conditions of the offer ironed out from the solicitors, which should give you time to get your mortgage in place.

If we are still prior to missives, perhaps it would be acceptable to change from 'subject to mortgage' to 'subject to property being mortgageable'. The subtle change of emphasis is that you are not laying a caveat for whether your financial situation may rule out a mortgage - you are turning it into a caveat solely about the condition of the property.

Even as a cash buyer, I would expect the property to be mortgageable and I would go to some lengths either to make sure it was or to make sure I knew what I needed to put right. If the vendors are awkward about 'subject to property being mortgageable', it is time to pull out.

Ulfar

I would leave your clause in, to do any thing else could leave you in the situation you have already stated.

Red_Arrow

Ulfar wrote: »

I would leave your clause in, to do any thing else could leave you in the situation you have already stated.

I'm confused now as this is what I thought too, but what al_1232 has said doesn't seem to be the case.

Can anyone clarify: Under Scottish law, are we contractually obliged when our offer is accepted or only until the completion of missives?

Red_Arrow

Right, sorry I'm a first time buyer so this is all confusing so please bear with me. I've got a few questions:

1) How long does it take for the bank to give a formal mortgage offer?
2) Can the bank back out after they have given this offer?
3) How long normally does it take to conclude the missives?
4) Can we back out before the missives have been concluded?

I'm just thinking, if it takes a few weeks to conclude the missives that may give us time to get the mortgage offer. If we don't get it or doesn't look like we will get it before the missives have been concluded we could back out.

Or am I not allowed too?

YoungBaker

Red arrow I appreciate there is a vast amont of conflicting info out there, but I have literally just finished a house purchase in Scotland this week myself. After our offer was in and accepted our soicitor advised us once we goto ur full mortgage offer to contact her to confirm we still wanted to proceed.

The system is different in Scotland in terms of once you sign the missives you are in a legally binding contract (which by the time you get your full mortgage offer sorted usually isnt that long after you offer). Whereas in England, the day before you complete as long as you havent exchanged contracts someone could offer a higher offer and you could get gazumped and lose the sale.

As the link I gave you before explains, you are only legally obliged to any costs only once the missives are signed - ie. you both sign following the agreement of a contract with all clauses outlined and sign to confirm you obide to these. Before then you just have an offer in subject to getting a contract lined up which you both agree to (which you do whilst your mortgage application is in).

Good luck.

hcb42

I was selling a house in Scotland, went to closing date, accepted the top offer, and they still pulled out, and nothing we could do about it, so it can happen. Dont budge until you are sure you have a 100% mortgage offer.