Being rushed into exchange and in need of advice

Grobbelrevell

Okay, so i'll start with some basic background here. My partner and I had an offer accepted on a property a couple of months back, and the vendor of that property is herself purchasing a newbuild from Redrow Homes. On the face of things this should be a straight forward transaction because as first time buyers we have no downward chain, and with the vendor herself purchasing a new build, there's also no upward chain. To engender further simplification we also opted to go with the solicitor that the estate agent recommended, Countrywide, because the vendor was also using them and it was our belief that it would help to ensure efficiency in communication and smoothe the process.

The new build property from Redrow is currently under construction, and scheduled to be completed mid-August, with a proposed completion date for our own sale therefore being mid-September. We agreed to allow the vendor of our property the time to wait for the new build to be completed, which is in effect 5 months from now.

Where we've hit a problem here is in the fact that Redrow Homes (who have been attempting to drive the process from the very start) have placed a deadline on when we exchange contracts on our sale - which is nothing at all to do with them directly - of the end of this week (it was actually last week, but that was entirely unrealistic so they very graciously afforded us an extra week...) whilst simultaneously dangling the threat of "selling to an alternative cash buyer" if that deadline isn't met. If they do that of course, then our sale falls through because our vendor then has nowhere to go, and thus, they have leverage here.

Now, as we see it, the only party in this transaction who stands to potentially lose out in any way by rushing through the exchange 5 months ahead of completion, is us. Not least due to a feeling of not having the necessary time to undergo the required due dilligence from our side, but to further underline this point we're also being told by our solicitor that we need to provide the deposit now, and quite honestly i'm very uncomfortable with this prospect, for several reasons, not least because that money will then be sitting in another parties account for that period of time, rather than accruing interest for us. When I pushed our solicitor into where the deposit would be going, exactly, I was told that it "would be passed up the chain and protected by the NHBC guarantee". When I looked into NHBC it appears to be linked to Redrow, as a new build company. It would appear then, that our deposit is in fact being passed through to our vendor, and then from them onto Redrow as her own deposit on the new build. Is this standard practice?

On top of that there's then the risk involved in handing over the deposit this far in advance of the proposed completion date. Our mortgage advisor has already told us that this whole situation is very unusual and, to quote him directly; "...it seems to me that your legal advisors and the vendors seem to be making their own rules as they go along." He also highlighted the fact that due to this time lag between mortgage offer (which we received last week) and completion, they may well request up to date financial documentation nearer the time. That potential additional hurdle, coupled with the fact, of course, that the mortgage offer itself is only valid for 6 months and that will be fast approaching come proposed completion, and therefore if any unforeseen delay occurs then we could find our mortgage offer being withdrawn and requiring reapplication, at least. All this leaves us questioning whether handing over a deposit at this stage is the right thing to do, and what the risks with that are. Is it guranteed to be repaid in full should the sale fall through under any circumstances? For example, if any party breaks the contract(s), will this be repaid? Also, should we be at the very least be recompensated for the lost interest for the period of time in question?

To add to the confusion here, lets return briefly to Countrywide, our solicitor. We've had nothing but issues with them from the start, leading us to a point last week whereby we submitted a formal complaint due to quite frankly inept service from the representative appointed to our case. Since then we've had our case handler changed, but we still don't entirely trust the advice we're being given (hence the thread on here). Case in point, they advised us yesterday that "it is a legal requirement that all deposits must be paid on the day of exchange". All deposits. Now, bear in mind that we're looking to pay 20% deposit here. I pushed back on this quite hard because of the doubts I have, and eventually I received a further response that "there is one other option that we could look at and that would be to pay the 10% only, which is the legal requirement to exchange contracts". So in fact the initial response was not legally correct, but if I hadn't pushed back I genuinely don't think they would have told us any different. This is just another example of several that has made us doubt the integrity of the advice that we're being offered during this process, from a company who we've felt have had a greater vested interest in the vendors interest than our own, despite apparently representing us. Were we not being rail-roaded into such a tight deadline for exchange we'd most likely change solicitors at this point.

In effect we're really not sure on where to go at this point. We don't feel comfortable signing contracts at this stage, and certainly not handing over our deposit five months in advance of the sale, without fully understanding the risks involved. If there's even a slight risk to our deposit then we won't be signing. Simple as that. If anyone with a little more insight into this area could possibly offer some independant advice it would be very much appreciated.

One possible alternative solution that we've been considering floating is to move our own completion date to next month, 3-4 weeks after exchange, as would typically be the norm, as I understand it. That would mean far less risk on our part, and no real financial loss as well. From there we would come to a seperate arrangement with the current vendor for rent on the property, for her to remain there until such time as the new build is completed. That way our sale is completed, and all monies passed through to her. From then on, her transaction with Redrow Homes would be entirely independant from us, and to our minds at least, far less complicated. Again, any advice as to whether this is a viable option would be welcomed.

Apologies for the lengthy post, but hopefully i've explained the situation well enough there.

aldershot

you've answered your own question.

"We don't feel comfortable signing contracts at this stage, and certainly not handing over our deposit five months in advance of the sale"

so don't get pushed around by a house builder.

BTW, I am also very wary of the purchaser and vendor or a property using the same solicitor.

fishpond

Countrywide:rotfl::rotfl::rotfl::rotfl::rotfl:
Get a different sol.

Doozergirl

It all sounds quite normal when a new build is involved. It actually sounds a bit like you're buying a part-exchange with Redrow driving.

I understand the potential mortgage expiration might feel uncomfortable, but again, new build developers always demand quick exchange with delayed completion and everyone marching to the beat of their drum. Your vendor can't possibly exchange on her house without exchanging on her sale with you. I also don't think it's reasonable for you to demand a quick completion with her to leave her homeless.

A 10% deposit is the norm on exchange, not the full amount. I'm not sure how much you're going to lose in interest, I suspect not much at the moment, certainly not enohgh to warrant a price reduction, but the deposit is held by solicitors, not random people's accounts.

The only thing I'm surprised about in your whole post is that people around you think it isn't normal. It isn't for a 'second hand' purchase, but it is for new build and that dictates the whole chain.

There is not a chance that Redrow will relax their demands.

Grobbelrevell

aldershot wrote: »

you've answered your own question.

"We don't feel comfortable signing contracts at this stage, and certainly not handing over our deposit five months in advance of the sale"

so don't get pushed around by a house builder.

Bottom line here is we want to be absolutely clear on the risks involved with that deposit, should we hand it over at this stage. In what scenario's could we possibly lose it? How can we safeguard it as much as possible? And really just some independant advice from anyone who's been in a similar situation, and/or someone with a greater knowledge of this process.

We don't want to lose the property if at all possible either. Pulling out would be a last resort, but one we would extend to if we remained uncomfortable or in any way unclear on the different aspects of the transaction.

somethingcorporate

Countrywide are a bunch of baffoons. I, too, suggest you get a different solicitor and don't get bullied into anything.

fairy_lights

Grobbelrevell wrote: »

Bottom line here is we want to be absolutely clear on the risks involved with that deposit, should we hand it over at this stage. In what scenario's could we possibly lose it? How can we safeguard it as much as possible? And really just some independant advice from anyone who's been in a similar situation, and/or someone with a greater knowledge of this process.

I think you need to change to a new solicitor ASAP to get some unbiased advice as your current solicitor doesn't seem to be working in your best interests at all.

stator

Might be some confusion because you only pay a 10% deposit. The difference between the value of the house and your mortgage amount isn't a deposit at all, it's just your equity. So all of the deposit is payable on exchange. The rest of the money is payable on completion, but isn't a deposit.

No way I would exchange 5 months before completion, especially since they might move the date again.

cloo

No, don't be pushed into it, they're taking advantage of your inexperience and who knows if this 'cash buyer' even exists?

Pushy sellers are the worst! We lost a buyer in part because our vendor's solicitor was being so aggressive in insisting on exchange and because they were FTBs they got scared away as they didn't seem to understand they had the option to say no and were still taking in the survey etc and felt railroaded.

eddddy

The worst case scenario (which you have identified) is that you exchange contracts and then your mortgage offer expires before completion - and you cannot arrange an extension or new mortgage.

You would then fail to complete, your vendors could sue you for damages (and possibly bankrupt you).

Is the completion date fixed in the contract? Or does the contract allow it to be moved (beyond the six month mortgage offer expiry)?

Normally, your solicitor would be advising you of these types of risks.

Also, I would have thought that your mortgage advisor would be familiar with this type of issue, and asked the lender about their policy on extending offers when completion is delayed etc.


As you may now be realising, perhaps it was a mistake to use solicitors recommended by the EA. They tend to offer a budget service, at a premium price. And they may be more keen to keep the EA happy, than they are to keep you happy (because they want the EA's repeat business). And the EA gets a big chunk of your legal fee as commission - so the EA's advice to use that solicitor isn't impartial.

saabay

Most sale contracts require the deposit to be held by the solicitors at the end of the chain as stakeholders so the solicitors keep it.


In a developer's contract it is common for the deposit to be paid to the solicitors as 'agents for the seller' so the solicitor will do with it whatever the seller tells them to. Usually this is paid to the developer. The difference is that the developer has the deposit covered by NHBC so if the builder goes bust the NHBC cover indemnifies the buyer in respect of the deposit.


It is important to note that only NHBC offer this. Other warranty providers may not. Your solicitor should check where the deposit will eventually be held and ask for evidence that it is indemnified in the event of not being recoverable because of a default by the builder.