As a buyer, can I offer a lock-out contract to my seller?

Jasper2011

We have a seller who has accepted our offer on their house, but they were very careful to ensure that we had a sale lined-up on our property first of all before committing to taking their property off the market and agreeing our offer. Turns out they had a sale fall through previously, and are being cautious (although I think its a perfectly reasonable thing to do anyway).

We have a mortgage agreed (not just in principle, but finalised), solicitors in place, monies paid for searches, etc.

Problem is, our own buyers are dragging their heels. We accepted their offer a while ago, and they still dont have a mortgage finalised or made any other financial commitment. In the meantime, we took our property off the market when we accepted their offer.

I have a hunch that our sale is going to fall down. This in itself isn't a particular concern to me. The offer was considerably under the asking price - we agreed to it because they were cash buyers and said they would move quickly - and we have a home in a desirable location where we know we can sell again within a few weeks if we need to put it back on the market.

However, if the sale does fall through, and our property needs to go back on the market, I suspect the vendors of the property we want to purchase will cancel our agreement and put their property back on the market (again, I think this is reasonable, I would probably do the same).

However, we are very serious about buying, we have had surveys carried out already and have the contract pack from them - everything seems in order. We know (as much as anyone can know these things) that selling our home will happen in the not too distant future, to the extent that I would be prepared to put my money where my mouth is and provide our vendor with a non-returnable deposit to secure the property we want to buy. I understand this is known as a lock-out agreement (or a variation of).

My question is: if it gets that far (and it hasn't quite... yet) is this a "done" thing?

If it is, who actually does the "doing"?

Do we ask our solicitors who are carrying out the conveyancing to draw up the contract or is it done as an entirely seperate agreement?

What would be a reasonable deposit to offer (purchase price is around £350k)?

What would be a reasonable timeframe to suggest?

I've read a number of threads already on this subject but they all seem to be coming from a buyer's perspective of trying to provide some financial security e.g. from being gazumped. In this case, its as much about us being able to show our seller that we are serious rather than protecting us from wasted fees.

Appreciate that this is potentially a risky proposition for us, in the event that we did not sell our house we would lose out. But that aside, what are folks' views on whether this is perfectly acceptable practice or complete insanity?!

Ta.

Slinky

They aren't cash buyers, they are buyers requiring a mortgage. There's a huge difference, what you have is a purchaser requiring a mortgage but with nothing to sell, by the sound of it.

Guest101

A non-returnable deposit - so a payment?

Jasper2011

They aren't cash buyers, they are buyers requiring a mortgage. There's a huge difference, what you have is a purchaser requiring a mortgage but with nothing to sell, by the sound of it.

Either way, they look like they are going to pull out of the purchase. Are you able to help with the questions I posed?

Jasper2011

A non-returnable deposit - so a payment?

Can you help with the questions I asked? Thanks

BJV

We had a similar situation all be it the people we where buying the house from would not get out. ( bankruptcy, forced sale - non of which we knew at the time. ) Our house sale fell through and we had to resell. we where very lucky and did it so quick our vendor did not know.

For us we went down the move out and rent route. But there are lots of options.

If you are absolutely sure that your house will sale and that is a lot of confidence, I would speak to your solicitor and see what they recommend.

It may be cheaper to get a bridging loan?

A lot will depend how much equity you have in your house that you will need to buy the next one.

OP I genuinely feel for you. Buying . selling moving home it is horrible. The only spark of advice I would give is don't give up. Don't lose sight of what you want. We didn't and 5 months after we moved out we moved into our old, knackered big Victorian and we all love it.

Make it happen and don't give up. But be 100% up front with your EA and solicitor.

Jasper2011

Thanks BJV, that is reassuring and useful.

It may be cheaper to get a bridging loan?

We need to release some cash from our sale, but not a massive amount. We have been lucky in that we have made a lot of profit on our property in the 5 years since we bought it. So our mortgage is a lot smaller than the value of the house. It is certainly worth looking into.

Surrey_EA

Jasper2011 wrote: »

Do we ask our solicitors who are carrying out the conveyancing to draw up the contract or is it done as an entirely seperate agreement?

You will probably find that the solicitors will probably take a surprisingly long time agreeing the terms of such a contract.

There will need to be all manor of conditions and clauses, describing under what set of circumstances you lose your deposit, and under what set of circumstances it is returned to you.

It sounds like your prospective buyers have not had a mortgage valuation carried out yet? Have you been given an explanation for the delay. If you really are that confident about re-selling your current property then communicate to your buyer that you intend to look for alternative buyers unless they can demonstrate they are intending to go ahead with the purchase.

You may wish to explore the possibility of exchanging contracts on your purchase, with a delayed completion, if that would be acceptable to your vendors. This is clearly not without significant risk though.

eddddy

You can propose a lock out agreement, but it's up to the seller whether they accept.

When "selling" the idea to your seller, what would you say is the benefit to them?

Why is it better for them to go with your lock out agreement, instead of just finding another buyer who can go faster than you?

(If there's no benefit to them, why would they agree to it?)


Also, is your seller also buying a property? If, for example, you want a 3 month lock out, will your seller's seller also wait 3 months?

gingercordial

You are proposing a payment of £30k to your vendors, which presumably you will lose if you fail to exchange by a certain date, and you want deducted from the price if you do exchange. So there is a clear reason why you would want to exchange.

What do you intend to be the disincentive for your vendor to pull out? Even if they sign up to this I can't imagine they'll not have an eye out for another buyer. If they find one and they pull out, can they just return your £30k and walk away? If so, what's the benefit of this contract to you when the vendor is not also tied in and all the risk is on your side? If not, what do you propose they should suffer for pulling out, how will you enforce that when they have no money on the table, and how on earth will you get them (or their solicitors) to agree?

Jasper2011

You may wish to explore the possibility of exchanging contracts on your purchase, with a delayed completion, if that would be acceptable to your vendors. This is clearly not without significant risk though.

Thank you - I had not considered this. Something to investigate...

It sounds like your prospective buyers have not had a mortgage valuation carried out yet? Have you been given an explanation for the delay. If you really are that confident about re-selling your current property then communicate to your buyer that you intend to look for alternative buyers unless they can demonstrate they are intending to go ahead with the purchase.

No, they haven't, and their excuses are wearing a bit thin. Latest response was that their mortgage advisor was on holiday.

We are communicating to them via our EA, and we have been absolutely clear in writing and verbally that we are not satisfied with the speed in which things are (or aren't) moving. How much of that is getting through to them, I have no idea.

If we didn't have this property we want to buy accepting our offer, and the risk of losing it if we put our home back on the market, I would most likely have told our potential buyers to stuff it a long time ago and instructed our agents to resell.