Unusual arrangement

Dizzybee_2

Hello all,

I wanted your thoughts on this. I have put an offer in on a property that has been accepted. I will be eligible for the mortgage I want after 3 months (due to some defaultsettings on my credit file). As I will complete on the house I'm selling and currently living in, in a few weeks, I will have nowhere to live.

So the buyer I'm purchasing from, has offered to let me live in the property as a tenant until I can complete . He wants 30,000 as a deposit and 800 in rent each month, and the rest on completion. He will reduce the price of the house by 30k to reflect that I've paid him a deposit.

My solicitor is going on draw up a legal agreement so I don't lose out. I just wanted your thoughts on this. It will save me 6 months of renting.elsewhere which is why I'm considering this arrangement.

ACG

Im surprised your solicitor is not advising against it.
What happens to the £30k if you can not get a Mortgage for whatever reason - the property gets downvalued, there are problems with the property or something in the vicinity that makes it unmortgageable?

Im not sure I would be getting in to this sort of agreement personally.

Thrugelmir

Rent the property as a tenant yes. Hand over such a large deposit no.

If for any reason you are unable to complete the transaction the deposit may well be lost.

Dizzybee_2

Thanks guys. My solicitor has the reservation.....but we are planning to meet to see if there is a way around it. To be honest, there is a stunning new build that I could purchase in a few months time..it is a bit further out..but I would get a huge 76k discount and there would be no risk involved. Decisions decisions ��

PasturesNew

Too complex. Too unusual. Too many potential problems and loop holes.
While it seems attractive to you now, the potential for something going horribly wrong and you regretting your choice for the rest of your life is high.

The big elephant in the room is the chance that a mortgage offer wouldn't be forthcoming, or straight forward, due to your past problems... and you might end up being stuck without a mortgage for, say, 1-2 years, or hunting around again and paying a LOT more as you're desperate.... all against a backdrop of the owner nagging you daily and making all manner of angry noises.

Loanranger

I have heard of this arrangement in Spain but I wouldn't hand over the 30K, just the rent and a legally binding agrement that the rent will all be deducted from the sale price.

ACG

Actually...
If you give the landlord a £30k deposit and he does not put it in one of the deposit schemes, does that mean you could sue him for £120k?...(only joking).

glosoli

Lenders also work from the lower of the purchase price and value to calculate the loan to value, so whilst it may be valued at the correct amount, as the purchase price is 30k lower, that element wouldn't count towards the mortgage deposit, and you would need a further percentage of the purchase price, would be madness.

Dizzybee_2

So..I told vendor I'm not willing to give him a 30k deposit and he came back with this. Let me know what you think.

"Re risk of deposit- don't worry I'm a fair person and I would not expect to keep the full deposit amount if things don't pan out. As such, I don't mind signing an agreement to agree to pay approx 85% back i.e. Return £25k to you if you don't sell yours.
However as you can appreciate I would need to keep £5k to cover all my expenses including removal costs, storage and flat/apartment rental costs and possibility of ending up with 2 properties to manage if you don't get a mortgage sorted.
But the deposit would give you a min 3 months time during rental period to sort mortgage and we could roll it on if necessary "

davidmcn

Where is your £30k going to be sitting in the meantime? What protection do you have against the seller going bankrupt or otherwise failing to complete the sale?

middleclassbutpoor

I think you are crazy for even entertaining the idea.

I would reply that you are are a fair person also and if you don't complete, upon presentation of the costs supported by correct invoices/receipts, you will put £5k in escrow with your solicitor which would pay for these costs.

They sound like they are moving whether you complete or not so those costs would be incurred anyway.

Just walk away and buy the other house you like, or find another place to live for bridging the 3 months gap . I'd rather pay 3 months more rent than risk £30k of my money based on them being fair.