Cash incentive to complete on specified date

ElsieMonkey

Cutting a long story short (well I tried, still a bit long sorry)!:

• We put an offer on a house mid-May and it was accepted.
• We are about a week away from exchange on our sale, and are going to go into rented for 6 months (with plan to buy our onward purchase giving some months left in rented to get into the bought property to refurbish, before then leaving the rented at the end of the 6 month period and moving into the bought property permanently).
• The vendor of the house we are buying is in financial difficulty and has to sell. When our offer was accepted we were told by her estate agent that she will be looking for shared ownership properties and downsizing (this worried me as it would reduce her options vastly - how long would be end up waiting for her to find somewhere to buy to move on to?!)
• We call her EA weekly for updates on her progress in finding her onward purchase, but she is ignoring the EA calls, and turns out her solicitor is not responding to ours and hasn't drawn up draft contracts yet (this has gone on for 5 weeks).
• In the meantime we paid £200 for our mortgage application, which has now been issued to us. We've held off on a survey yet in fear of losing anymore money since we had no idea if she was still wanting to sell!
• We decide enough is enough and leave a letter through her door, nicely yet firmly letting her know how concerned we are at her lack of communication etc. We also offer £2,000 on completion on strict condition she agrees to arrange herself chain free accommodation and completes on or before the date we set (3 months from now). Also That she instructs her solicitor to start work immediately, and that she updates her EA weekly. The money will be held and transferred by the solicitors.
• To our surprise she visited the EA in person same day, to apologise for her behaviour (I think she is sticking her head in the sand about her financial situation and is nervous) and that she accepts our offer! Money talks as they say...

I'm not particularly happy about offering the 2k incentive. But the property is at a very decent price and offers us just what we want. The 2k effectively takes us up to meeting the asking price, which we would have happily gone to anyway if needed. This way we also get some control of the situation.

When we bought our current property, the vendor agreed to pay some money towards cost of works the property needed, and the vendors solicitor held this money for us, when about 3 months after completion we produced a quote from someone for the works in order for the money to then be released to us. I don't remember any contract as such being drawn up or signed, just agreement confirmed by solicitors via email on behalf of the clients.

How do you think our agreement with the vendor of the property we're buying now should be formalised by the solicitors, in your opinion/experience? I'm thinking that our solicitor will just need to inform the vendor's solicitor of the agreement/offer made/conditions and seek the vendor's solicitors response that the vendor agrees? We then transfer the money to our solicitor ready for completion, and our solicitor transfer this money to the vendor's solicitor once successful completion has been confirmed?

Thanks all! :beer:

Alter_ego

That could be seen as understating the price you are paying for the house.
Does £2k take it to next stamp duty band?
Is she in negative equity?
She must complete on the agreed completion date anyway.

ElsieMonkey

Alter_ego wrote: »

That could be seen as understating the price you are paying for the house.
Does £2k take it to next stamp duty band?
Is she in negative equity?
She must complete on the agreed completion date anyway.

No it takes it nowhere near the next band of stamp duty.

I don't think she's in negative equity from what I understand.

We needed something to incentivise her into moving ahead, as she has lost previous buyers in the past from being so slow and unresponsive. Yes once contracts are exchanged she does need to stick to the agreed completion date. But our worry was we would never get to the stage of exchanging and so agreeing a completion date if she is left to her own devices. This way she has to make sure everything is done ready to complete by the specified date, or forfeight the money.

davidmcn

ElsieMonkey wrote: »

I'm thinking that our solicitor will just need to inform the vendor's solicitor of the agreement/offer made/conditions and seek the vendor's solicitors response that the vendor agrees? We then transfer the money to our solicitor ready for completion, and our solicitor transfer this money to the vendor's solicitor once successful completion has been confirmed?

Yes. You tell your solicitor. They add it to the price. Simple.

ElsieMonkey

davidmcn wrote: »

Yes. You tell your solicitor. They add it to the price. Simple.

This makes sense, but if we add it to the price of the property, she has no incentive to complete on or before the specified date? Because she will be getting then the extra 2k no matter what. We want flexibility where if she doesn't work to and fulfil this date, she doesn't get the 2k extra.

We have done this before, so surely it can't be dodgy?! We were the recipient, but it was money from the vendor to us for works needed on the property, and it was released to us after completion. But I can't remember what the solicitors agreed to call this arrangement???

Hoploz

Is the any way this can be formalised and separated as an incentive rather than added to the buying price. Just thinking as OP has already got the mortgage offer, changing the agreed purchase price would have to go back to the lender and the offer amended accordingly.

And if the date stated for the incentive turned out to be missed but the deal was still going ahead, the mortgage offer would have to be changed yet again, causing another delay to the already-delayed deal.

ElsieMonkey

Hoploz wrote: »

Is the any way this can be formalised and separated as an incentive rather than added to the buying price. Just thinking as OP has already got the mortgage offer, changing the agreed purchase price would have to go back to the lender and the offer amended accordingly.

And if the date stated for the incentive turned out to be missed but the deal was still going ahead, the mortgage offer would have to be changed yet again, causing another delay to the already-delayed deal.

Exactly! You understand where I'm coming from I know money is sometimes negotiated and offered by a seller to a buyer, for works that need to be done on a property, and this is managed by the solicitors and released to the buyer on completion, so I don't really see this as being any different?

It worries me that someone mentioned it could be seen as understating the value (I'm presuming to our lender)? It would be obvious we're not trying to dodge stamp duty because the extra 2k takes us no where near stamp duty thresholds. But I don't want to be viewed as trying to do anything illegal!

davidmcn

ElsieMonkey wrote: »

This makes sense, but if we add it to the price of the property, she has no incentive to complete on or before the specified date? Because she will be getting then the extra 2k no matter what. We want flexibility where if she doesn't work to and fulfil this date, she doesn't get the 2k extra.

But the completion date is also in the contract. So if she wants to amend the completion date to something you're not happy with, you amend the price. And so on until you're both happy and exchange.

As for whether or not it ought to be in the price, that's something your solicitor will need to sort out with your lender - obviously they're usually more concerned about the price being overstated than understated, so I wouldn't have thought it should be an issue.

ElsieMonkey

davidmcn wrote: »

But the completion date is also in the contract. So if she wants to amend the completion date to something you're not happy with, you amend the price. And so on until you're both happy and exchange.

My concern is we never get to the point of even setting the completion date in the contract, which happens just before exchange of contract stage, because she is so slow/nervous/god knows what else. We needed to offer this incentive just to get her working to get to exchange of contracts...

davidmcn

ElsieMonkey wrote: »

My concern is we never get to the point of even setting the completion date in the contract, which happens just before exchange of contract stage, because she is so slow/nervous/god knows what else. We needed to offer this incentive just to get her working to get to exchange of contracts...

Well, I don't see what else you can do, if you've made clear to her the criteria for getting the incentive. It's up to her.