Exchange to completion 6 months.... 31 March 2017 at 5:35PM in House buying, renting & selling 11 replies 2.1K views

FloraDora

Hi, just trying to find out what the pitfalls of having an extended exchange to completion period of approx. 6 months are? One of my kids is desperately trying to buy a house in an area where 1st time buyer properties are being sold within 2-3 days of going on market, being outbid (called it gazumping in my day) when he is able to get time off work to view. He's found a place where the owners are buying a new build that won't be finished till autumn and his offer (well over asking price) has been accepted. I'm concerned about mortgage offer expiring, responsibility for property after exchange (I know he would have to take out insurance at exchange).
Anyone else think this isn't a brilliant idea?

Pixie5740

A 6 month gap between exchange and completion would be more of an issue for the vendors. New build completion dates often slide but the vendors will be forced to complete or face penalties if they exchange now. From your son's point of view I'd rather exchange sooner than spending money on solicitors, surveys and searches whilst crossing my fingers for 6 months hoping I wasn't going to be guzumped.

gingercordial

How secure does he think his job is? If he got made redundant he might not be able to get the mortgage he has applied for but would still be legally obliged to buy the house no matter what. That would mean he would lose his deposit and also be liable for other costs incurred by the vendors as a result of his failure to complete.

This is a risk for any period between exchange and completion but the longer it is the more likely something could go wrong. He might become ill or injured and unable to work, or his work might ask him to relocate, or he might want to change jobs but feel locked in as he might not be able to get the mortgage when on probation at a new place.

Just something to think about.

eddddy

As you say, mortgage offers usually last 6 months, and if an offer expires, there's no guarantee that you son would get another offer.

(If the mortgage offer expires and he can't get another, he would be unable to complete and be in breach of contract. In extreme circumstances, he could be sued for tens of thousands.)

FloraDora

Thank you. He's told me that his solicitors will be charging an extra fee for the extended period (but not how much it is)....
I'm also concerned regarding anything happening re the mortgage eg redundancy, accident etc. but
I have to say that my main concern is a deep down suspicion as to why someone would do this in what appears to be a rapidly rising sellers market. The vendors must be aware that their house will sell quickly (went on market Monday my son saw it and made offer on Tuesday and wasn't the first one to do so apparently) so why not wait for a few months and get even more for it (presumably cost of new build has been agreed)?
If my son does exchange and pay 10% could the vendor then do anything untoward with the money or would it be held by solicitor until completion?

eddddy

FloraDora wrote: »

I have to say that my main concern is a deep down suspicion as to why someone would do this in what appears to be a rapidly rising sellers market. The vendors must be aware that their house will sell quickly (went on market Monday my son saw it and made offer on Tuesday and wasn't the first one to do so apparently) so why not wait for a few months and get even more for it (presumably cost of new build has been agreed)?

Exchanging contracts to buy, before you exchange contracts to sell is risky.... for example,

- Your buyers might back out late in the day, leaving no time to find another buyer

- Property prices might tumble, meaning you can no longer afford the property you are committed to buying.

FloraDora wrote: »

If my son does exchange and pay 10% could the vendor then do anything untoward with the money or would it be held by solicitor until completion?

Deposits are typically held in the solicitor's bank account.

Thrugelmir

FloraDora wrote: »

his offer (well over asking price) has been accepted.

Has he obtained a mortgage yet? Paying over the odds doesn't mean that the valuer appointed by the lender will agree.

FloraDora

Yes his mortgage is agreed, and in this instance he is nowhere near the maximum that he can borrow. He has a good deposit, at least 20% if he goes to the max, his problem has been getting to view and put an offer in on properties in the area he wants, they are being sold within 2-3 days of being listed and at much more than the asking price! By the way this isn't London, but Bristol. The properties he is looking at are older style 2 bed terraces in a fairly central area, being listed as "first time buyer" properties for anything between £225 - £300k depending on condition!

emmatthews

When a friend of mine looked at purchasing a new build, they wouldn't allow her to reserve a plot until her property was SSTC. Was a couple of years ago but if developers still do this it may explain why they have marketed their property now.

Thrugelmir

FloraDora wrote: »

Yes his mortgage is agreed, and in this instance he is nowhere near the maximum that he can borrow.

Unlikely it is, As one has to find a property then make a full application. Currently only has a Decision in Principle (DIP) which does not constitute a formal offer.

FloraDora

Thank you, emmatthews, that has given me some reassurance.
Many thanks to you all for the advice and comments.