Seller giving us money for repairs to house

SeaVixen

Hi all,

FTB here.
The survey has uncovered some work that needs to be done to the house, and we're in the process of getting some quotes on that. The seller (via EA) has said that when we have the quotes we can either renegotiate the price, or we keep the price the same and the seller gives us the money after completion.

The latter seems the most attractive to me, as our LTV is right on a boundary, so I don't want to take any money out of our deposit unless we really need to.

Is this a common thing to happen? Do we need an additional contract to say that they will definitely give us the money? Are there any risks that we should be aware of?

Happy to ask the EA about this as well, but just wondering if you wise lot have any experiences with this.

Current offer is £240,000, and I'd estimate that the quotes for repairs will come in about £5k.

Many thanks in advance!

foxy-stoat

Yes, get the purchase price reduced by £5,000 would be what I would do.

davidmcn

You can't (legitimately) keep it a secret from your lender, and in any event for your own protection you'd need any such "cashback" to be in your contract, in which case your solicitor would know about it - and assuming they're also acting for your lender, they'd need to declare it.

Carrot007

SeaVixen wrote: »

The latter seems the most attractive to me, as our LTV is right on a boundary, so I don't want to take any money out of our deposit unless we really need to.

It what way does paying less increase your LTV.


5K means it is just cosmentic repairs and the mortgage valuation will niot change, and even if it does your deposit does not and becomes a greater percentage of a lower value.




Your seller appear to want to keep it unnoficial and as such unoffical and wil lrpobably not pay. Sounds a great deal doesn't it!!!!!!

SeaVixen

Carrot007 wrote: »

It what way does paying less increase your LTV.

The cost of the repairs would be coming out of our deposit money. So the loan from the bank would be the same, but we'd have £5k less deposit.

SeaVixen

davidmcn wrote: »

You can't (legitimately) keep it a secret from your lender, and in any event for your own protection you'd need any such "cashback" to be in your contract, in which case your solicitor would know about it - and assuming they're also acting for your lender, they'd need to declare it.

Thanks David.
I wasn't thinking of keeping it a secret from the lender. Would there be a problem if they knew about this?

davidmcn

SeaVixen wrote: »

I wasn't thinking of keeping it a secret from the lender. Would there be a problem if they knew about this?

They'll treat it as being a reduction in price to £235k. I don't know how that affects your LTV ratio.

(I'm assuming that whatever the nature of the repairs is, the lender is broadly aware and not concerned i.e. you haven't picked up on something significant which wasn't in their valuation report)

SmashedAvacado

you can do this and many of the lenders have limits to what this amount can be about disclosure. Its typically called an allowance and rather than a reduction in the price, its just an amount paid back by the seller (ie held by the buyer) at completion for such matters. Basically it means you pay the same SDLT as the price is the same, can use the same mortgage offer (which will typically identify the price - so you dont need a new one) and the lawyer may either need to report it to the lender or not (depending on the CML handbook rules for that lender).

The money is just held back as an allowance - can often be for things like repairs, indemnity insurance costs, service charges. your solicitor shoudl deal with the wording in the contract, and can decide what comfort if any they need from the lender.

DigForVictory

I'm of the discount in hand worth no end of promises on a bush school.

Not least as if the seller is ready to discount on minor stuff, when do you have the full structural survey booked for? (I'm an a profoundly untrusting soul some days.)

saajan_12

SeaVixen wrote: »

Hi all,

FTB here.
The survey has uncovered some work that needs to be done to the house, and we're in the process of getting some quotes on that. - what are the works? surveys will often say things are not perfect / upto current standards, but that doens't mean they are necessary The seller (via EA) has said that when we have the quotes we can either renegotiate the price, - makes sense, if these defects weren't visible at the point of viewing and so not factored into the original price. or we keep the price the same and the seller gives us the money after completion. - after completion, both sides of the house purchase contract. Then seller says "what payment?".

The latter seems the most attractive to me, as our LTV is right on a boundary, so I don't want to take any money out of our deposit unless we really need to. - again what are the works? If they aren't actually necessary on day 1, then you don't need to spend the money out of your deposit on day 1. Thus the purchase price mortgage decrease, deposit stays the same. Your LTV decreases ie

Is this a common thing to happen? Do we need an additional contract to say that they will definitely give us the money? - what would that contract say? Seller gives you £x and you give £0? Thats not a contract, that's a gift. Gifts are not enforeceable. Are there any risks that we should be aware of? - Yes, that the seller doesn't pay you £x. Plus mortgage fraud, if you misrepresent the actual price paid as £240k when you're really paying £240k - 5k.

Happy to ask the EA about this as well, but just wondering if you wise lot have any experiences with this.

Current offer is £240,000, and I'd estimate that the quotes for repairs will come in about £5k.

Many thanks in advance!

If you include it in the main purchase contract through the solicitors, then they will need to notify the lender, effectively you're paying £240k - £5k. They will take that into account when calculating LTV etc based on £235k valuation.

If you include it in a separate contract, that would effectively be "seller pays you £5k, you pay £0". There's no consideration, so this isn't a contract. You may be able to sign this as a deed, but even then can be hard to enforce. If the seller doesn't pay, you're left chasing them through courts, which will incur more costs before you get anything back, and they could argue any discussions of separate payments are overridden when you exchange contracts, which may have a cluase saying the exchanged contract forms the 'entire agreement'.

All in, bad idea.
Just reduce your offer accordingly.

KatieDee

I had a similar situation with a previous purchase (although the amount was significantly less).

I was a bit torn, as to make it legally binding so they couldn't back out on completion, I would have had to disclose this to my solicitor and have an agreement written up. When I asked about this hypothetically, he said that he had a legal obligation to inform our lender of the amount, as it may affect the amount they would offer (we were technically receiving a discount on the property, although some lenders have an amount they will accept as an "allowance", but this still has to be declared).

We could have proceeded with this unofficially, but we would be relying on the vendor to pay on completion and not just run off with the money. I was a bit anxious about this, as there would be very little protection in place and I think it would have soured the experience, having to find the cash ourselves once we moved in. Having said that, the EA was VERY supportive about the idea of us not telling our lender or solicitor.

The purchase fell through so it's all irrelevant now, but this was my experience. You do have somewhat of an obligation to inform your lender and if your solicitor gets wind, he will definitely need to disclose it. If you decide to do it off the record, you run the risk of them not paying.