New build price drop after exchange advice

happy35

My son and partner have purchased a new build house off plan, they have exchanged but the house is still not built, walls are up but no roof on.

The exchange was carried out on a minimal amount of their money and £8000 contribution from the builder, with the rest payable on completion as they are paying a 10% deposit.

The same house a few doors down has just been put up for sale for £20,000 less. In the previous phase they were around £10,000 less looking at Zoopla.

We are concerned that this will effect the mortgage lender valuation and how much they can borrow. They are very young first time buyers and are currently living with me, I feel they have been taken advantage of with the sales pitch

I am unsure whether they should proceed, negotiate extras for the difference or ask for cash back

Does anyone have any advice? Thanks

FTBAngst

They’ve exchanged, agreed to pay the amount. The contract might have a clause saying if the house isn’t complete by x date then you can pull out but other than that they have very few rights or come backs.

happy35

Thanks, I thought that might be the case.

My thoughts were to pull out of this one and buy the other one, they would still save a lot of money.

happy35

happy35 wrote: »

Thanks, I thought that might be the case.

My thoughts were to pull out of this one and buy the other one, they would still save a lot of money.

I also live on the same estate and have just found out that if I add a conservatory etc I have to pay them a fee if work is done before the site is finished. This is the first I have heard about it so will be discussing this with them as I have had a local firm out for a quote, I only found out from a chat with a neighbour who has done improvements and received an invoice of fees out of the blue.

elsien

happy35 wrote: »

Thanks, I thought that might be the case.

My thoughts were to pull out of this one and buy the other one, they would still save a lot of money.

They can't pull out of this one, they've exchanged contracts.

And why would the builder agree to lose 20K by letting them do so?

Re the conservatory, have you checked all the paperwork from when you bought, and any restrictive covenants? They may not have told you verbally but it must be in there somewhere if they're sending invoices out.

Thrugelmir

happy35 wrote: »

We are concerned that this will effect the mortgage lender valuation and how much they can borrow.

Surely a mortgage is already in place if they've exchanged contracts.

AnotherJoe

happy35 wrote: »

My son and partner have purchased a new build house off plan, they have exchanged but the house is still not built, walls are up but no roof on.

The exchange was carried out on a minimal amount of their money and £8000 contribution from the builder, with the rest payable on completion as they are paying a 10% deposit.

The same house a few doors down has just been put up for sale for £20,000 less. In the previous phase they were around £10,000 less looking at Zoopla.

We are concerned that this will effect the mortgage lender valuation and how much they can borrow. They are very young first time buyers and are currently living with me, I feel they have been taken advantage of with the sales pitch

I am unsure whether they should proceed, negotiate extras for the difference or ask for cash back

Does anyone have any advice? Thanks

They cannot pull out, because they've exchanged.
The valuation must have already been done, prior to exchange.
They must have already agreed what they are borrowing.
How can they negotiate when they have nothing to negotiate with?
The best they could do is throw themselves on the builders mercy but i doubt that would go down well, no doubt the builder would say that had prices been increasing in the next tranche, they wouldnt be asking for more money.

AnotherJoe

Good point in post, is there a long stop date in the contract?

That might be their Get Out of Jail Free card

happy35

AnotherJoe wrote: »

Good point in post, is there a long stop date in the contract?

That might be their Get Out of Jail Free card

What is a long stop date?

There is a mortgage in place that lasts for 6 months, the completion date has slipped a month so this may now expire and need an extension.

Flugelhorn

if they have exchanged there must be some completion date in the contract?

FTBAngst

happy35 wrote: »

What is a long stop date?

There is a mortgage in place that lasts for 6 months, the completion date has slipped a month so this may now expire and need an extension.

A long stop date is the date by which the house should be finished and if it goes past that date you can walk away without losing your deposit. I’ve spoken to my financial advisor about new builds and delays and he said you either have to reapply or apply for an extension, and it’s something to consider if 1) you’re thinking of changing jobs 2) you have a very low deposit. you’ll still be obligated to buy at the agreed price after you’ve exchanged, if the bank won’t lend you enough month because of a change in circumstance or house value, you’ll have to stump up the rest.