Help! Price reduction and mortgage

TrixA

We're in the process of buying a house - our first purchase in England. The mortgage application was quite a complicated process because we had a previous purchase fall through, and were given inconsistent advice by different people at HSBC about whether we could continue with our existing mortgage or would have to reapply for a new one (our original application was before MMR rules kicked in). Eventually we found a helpful person at HSBC who was able to process it as a simple change of property details, particularly as we are looking to borrow less than we were with the previous purchase. She was so apologetic about the treatment we had received from her colleagues that she refunded us the £900 product fee.

HSBC seem to have a slightly unusual process where they send the mortgage offer out very early in the process, after underwriting but before the valuation. So we received the mortgage offer for the new property some weeks ago, followed by the bank's valuation, which came back ok.

Since it's a Victorian house we then got our own structural survey, which revealed a number of issues requiring "immediate attention". We have got quotes for the work which indicates it will cost around £8-10k to put right. So we were intending to renegotiate the price, and I think the vendors are also expecting this.

If we reduce the price we will also have to reduce our mortgage borrowing to remain within the same LTV band - we are probably talking only a £2k reduction. However, on speaking to HSBC we were again given the advice that we would have to put in a completely new mortgage application and speak to an adviser etc. This seems bonkers to me. I thought it was normal in the English sytem to renegotiate the price prior to exchange, which presumably would often lead to a reduction in the amount borrowed? What about gazundering situations where I thought the whole point was to reduce the price just before exchange? I'm worried we may be getting the wrong info from HSBC again and would like to speak to the helpful person who sorted us out before, but she's out of the office until next Tuesday. If we wait until then I think we will lose the window for negotiation.

I'm not sure what to do. We are reluctant to go ahead at the original purchase price given the new information about the condition of the property, but it's a chain free property and I don't think the vendors will be prepared to wait for weeks longer while we submit a new mortgage offer. They are pushing us for a completion date now. We were planning on doing the remedial works after completion but I'm now wondering if we ought to be pushing for them to be done before exchange, with a financial contribution from the vendor? Do we have any other options?

eddddy

Presumably your only option is to negotiate the price down now, on the assumption that the HSBC person will sort it out on Tuesday.

(And I wouldn't complicate negotiations with the EA/vendor by intoducing all the detail you've put in your post.)

So this will probably (almost certainly) be resolved on Tuesday. But if it's not, you'll have to reconsider your options at that time.

TrixA

OH has now spoken to our solicitor and she has suggested that we ask the vendor to give us a "retention upon completion" so that we can carry out the works. She suggested this is a fairly common thing? She did say that if the amount was significant the bank would have to ok it, but at least this gives us a way forward until next week when we can speak to the HSBC person.

bris

So do you really want to fix someone else's property before exchange? you really haven't thought that one through.

TrixA

bris wrote: »

So do you really want to fix someone else's property before exchange? you really haven't thought that one through.

No, that's not what we're proposing. The retention would be held by our solicitor and would enable us to carry out the works following completion.

mrginge

Sounds like a different way of saying 'vendor gifted deposit' to me.
Which your lender is likely to block.

TrixA

mrginge wrote: »

Sounds like a different way of saying 'vendor gifted deposit' to me.
Which your lender is likely to block.

But it's not. It's for specific remedial works which have been identified in a structural survey and quantified by subsequent quotes from the relevant specialist tradesmen. I don't think our solicitor would have suggested it if the bank was likely to block it on that basis?

mrginge

TrixA wrote: »

But it's not. It's for specific remedial works which have been identified in a structural survey and quantified by subsequent quotes from the relevant specialist tradesmen. I don't think our solicitor would have suggested it if the bank was likely to block it on that basis?

Remedial work that wasn't identified or requested by the banks survey.

Now that i'm thinking about it i can't decide whether it is a vgd, or if it's just a straight cashback.

If you (or your solicitor) are considering declaring to the bank that the purchase price is X when it's in reality X-Y, I think you should be very careful.

AlexMac

TrixA wrote: »

No, that's not what we're proposing. The retention would be held by our solicitor and would enable us to carry out the works following completion.

Sounds good to me; especially if it saves your mortgage.

We bought in 2011 with (an admittedly much smaller) retention held by the vendor's solicitor for about £600 of works to a deep pothole which opened up in their private road between exchange and completion. We completed, moved in, did the work and sent the bill to the vendors solicitor (via our one). They paid the contractor; simples.

My mate has just bought with a £2k retention for roofing repairs, not done prior to completion. Bucket is still in loft!

So this sound quite normal but do it through the lawyers to ensure its kosher

lk92k

What about the works to be carried out between exchange and completion? We did this and instead of the typical 1 week between exchange and completion, we had 3 weeks so that the work wasn't as rushed and we were able to inspect everything before we completed on the sale. Our solicitor advised this rather than waiting until after completion.

blues

We just did the same thing. We reduced our offer due to work which needed doing. Our mortgage company advised we kept the purchase price the same and our solicitor kept back the 5k we negotiated off and gave it back to us an "allowance for works." This worked out fine. Just be aware though that you pay stamp duty on the original purchase price.