Pulling out of new build purchase

paddyposh

Hi all,

Me and my partner decided to buy a new build. The completion date is any time now, looking at around 2 weeks ~. We exchanged contracts a couple of months back. There has been a bit of a change of heart on one side, it seems. If this wasn't to work, I am guessing our two options are:

1) pull out now, however we have exchanged so therefore I assume the selling company could take us to the cleaners financially;

2) complete the purchase, start the mortgage and then look to sell pretty much straight away.

Are the any other alternatives? Anyone had this scenario and if so what did you do?

Hating life right now

pinkteapot

Pull out before completion and at best you'll lose the deposit you've paid (10%?). At worst you'll be sued to try to force you to complete, or for all the costs to the builder of selling it again.

If you move in then try to sell:

Mortgage companies won't lend on a property that's been owned for less than six months (due to money laundering concerns), so if you try to sell straight away then you'll only be able to sell to cash buyers, which will severely limit your market and therefore dampen your price.

You also pay a premium to buy a new-build, and you'll lose that if you sell. New-builds typically sell for less than what was paid for the first year or two.

Honestly? Your best bet is to move in and live there for a few years. What are the reasons for the change of heart?

Alternatively, could you rent it out? You'd have to get consent to let from your mortgage lender. You can't re-mortgage for the first six months (again, money laundering), so you couldn't switch to a let-to-buy mortgage until then.

caeler

It might be worth seeing if you had a stop clause put into exchange, this is where the deal is off if the developer delays on their original estimated completion date. I think it is called a stop clause or long stop or something. Chat it over with your solicitor to minimise your damage but you are right, you are legally obliged to complete now.

If you are not selling your current property could you remain where you are, complete on the new build and rent? I appreciate not everybody wants to become accidental landlords.

loubel

Neither is a good solution I'm afraid.

1. As you have exchanged contracts, withdrawing now would have serious financial repercussions. You would, at the very least, lose your 10% deposit, mortgage and solicitor fees and search fees. The seller would also be able to sue you for their loses due to your breach of the contract. If the property has gone down in value you could find yourself being sued for a substantial additional sum.

2. Selling straight away will also likely be difficult. People will be put off by your quick turnaround and wonder what's wrong with the house. Lenders won't want to lend on it until you've owned it for 6 months. As you often pay a premium for buying a new build you may find it is worth less than you paid for it. You will also have sale costs and probably an early repayment penalty on your mortgage, so selling quickly could prove very costly.

What is the issue causing you to have second thoughts? Is it something to do with the house or is it a problem between you and your partner?