A mortgage offer can still be withdrawn after exchange – how to minimise the risk?

SpiderLegs

V_for_viennetta wrote: »

...
For all I know, of course, the sellers might simply be as shortsighted as many people on this forum and prefer 1).

My god you appear utterly clueless.
Good luck with your purchase.

AnotherJoe

V_for_viennetta wrote: »

Well, but would you ask your buyer to wait 2+ months between exchange and completion? That's how all of this started, after all.

No i wouldnt. If i as a purchaser was asked to agree to that found that unacceptable id look elsewhere or want a price drop for the additional risk. (BTW, as I type this ISTR there is a insurance you can take out to cover failed purchases. Not sure if it would cover your worries)

V_for_viennetta wrote: »

What is flaky in "if the mortgage offer gets withdrawn for a reason other than misrepresentation or fraud"? What is flaky in not wanting to be on the hook if the bank changes its mind?
Because its not your sellers problem and its flaky to try and offload it on to them. They have no link whatsoever with your bank !! They no nothing about it, know nothing about how close to the limit your mortgage is, and so on.
If you are in a chain, do you realise that, with the standard conditions of sale, YOU are on the hook if your lender changes its mind, but also if your buyer's lender does?


If the buyers lender pulls out after exchange they are on the hook. That indeed is what your concern is with you as buyer.

Please enlighten me because I fail to follow.

Or is your reasoning simply that contract terms should be set in stone, and anyone who dares actually read them or question them is an unreliable low-life who's up to no good and shouldn't be trusted?

Anyone who tries to impose unrealistic Ts&Cs is someone who doesn't understand how the system works and is someone that will be problematic to work with on a sale or buy. Same as sellers who sign up for the ridiculous "modern method of action" and the wonder why most buyers give them a wide berth,

Good luck on your one person crusade to change the system. (many examples above explained to you, in essence your whole concept of "fault" is too indeterminate and open to query/challenge)

Thrugelmir

V_for_viennetta wrote: »

Well, but would you ask your buyer to wait 2+ months between exchange and completion? That's how all of this started, after all.

If the property is a newbuild, then yes not unreasonable. Otherwise what circumstances have arisen to create such a request.

V_for_viennetta

Deleted_User wrote: »

I just don't see why any seller would agree to any contract terms that offer them zero benefit and give all the protection to the buyer.

In my case, it's very simple: because otherwise I would not accept the seller's unusual demand of a 2+ month wait between exchange and completion. Why should I accept this unusual demand which exposes me to greater risks but offers me zero benefit etc etc?

In the case of a chain, it should be in everyone's interest, like I tried to explain.

Imagine this chain: A-B-C-D

If A's lender changes its mind at the last minute, the chain collapses. Then you'd have
B suing A and keeping A's deposit
C suing B and keeping B's deposit
D suing C and keeping C's deposit

What most posters seems to fail to realise is that the current system makes everyone liable if just one lender in the chain changes its mind at the last second.

Deleted_User wrote: »

Also, conditional exchanges are a thing already. They could just be used more

Could you please elaborate on this point? I had heard of exchanges conditional to planning permission being received, but I had never heard of them being subject to other conditions. I'd be interested in learning more.

SpiderLegs wrote: »

My god you appear utterly clueless.

Why? The mortgage offer is not fully binding and the bank may change its mind. We may all have different opinions on how likely that is and how willing we are to take that risk – that’s subjective. What is NOT subjective, and what cannot be denied, is the fact that the bank has this get out of jail card, which would cause me to lose my deposit and potentially be sued.

SpiderLegs wrote: »

Good luck with your purchase.

Thanks!

AnotherJoe wrote: »

Because its not your sellers problem and its flaky to try and offload it on to them. They have no link whatsoever with your bank !! They no nothing about it, know nothing about how close to the limit your mortgage is, and so on.

You seem to imply this can only happen if I am “close to the limit”. You have evidently not understood what I was saying. The bank has a get out of jail card. It may, at its sole discretion, pull out for whatever reason -my credit rating, LTV affordability etc are not the only reasons why a bank can pull out.

AnotherJoe wrote: »

Anyone who tries to impose unrealistic Ts&Cs is someone who doesn't understand how the system works and is someone that will be problematic to work with on a sale or buy

Ok, you have confirmed my suspicion that this was your line of reasoning.

AnotherJoe wrote: »

Good luck on your one person crusade to change the system. (many examples above explained to you, in essence your whole concept of "fault" is too indeterminate and open to query/challenge)

Well, the system is flawed. This flaw may present itself extremely rarely, but this doesn’t mean it’s not there.
Again: mortgage offers are not binding: a bank can pull out at the last second for whatever reason, leaving a buyer on the hook – potentially even bankrupting him/her. The legal wording of the mortgage offer does allow this and the wording of the standard conditions of sale make the buyer liable. These are UNDENIABLE FACTS.
My concept of fault? Well, the changes I proposed to the wording do not mention ‘fault’ – they mention that the buyer wouldn’t be liable if the mortgage offer is withdrawn for a reason other than misrepresentation or fraud. No one has yet explained why this would be ambiguous.

V_for_viennetta

Thrugelmir wrote: »

If the property is a newbuild, then yes not unreasonable. Otherwise what circumstances have arisen to create such a request.

It's not a newbuild. They tell me they want this because they don't want to commit to renting before I am fully committed to buying (ie before the exchange), and they reckon that a period of ca. 2 months should be enough for them to find a temporary rented accommodation, move etc. They also tell me they want to do this to avoid being in a chain, and that they want to buy elsewhere in 2020.
Of course it could all be a bunch of lies - I have no way of being sure, but it does sound plausible.

V_for_viennetta

AnotherJoe wrote: »

BTW, as I type this ISTR there is a insurance you can take out to cover failed purchases. Not sure if it would cover your worries)

You mean Home Buyer Protection Insurance ? I thought it was an insurance against gazumping but tbh I never looked into that. Or did you mean some other kind of insurance? Thanks

ACG

Just refuse to exchange with that sort of time frame between exchange and completion. So they can either bring completion forward or delay exchange.

You are never going to get the vendor to agree to your request (although with Brexit, I can see your point), so if it is a concern for you, then do not exchange contracts. There is nothing to say you have to exchange as soon as you are ready to, you can just sit and wait until closer to the expected completion date.

AnotherJoe

V_for_viennetta wrote: »

You seem to imply this can only happen if I am “close to the limit”. You have evidently not understood what I was saying. The bank has a get out of jail card. It may, at its sole discretion, pull out for whatever reason -my credit rating, LTV affordability etc are not the only reasons why a bank can pull out.

It was an example, point being the seller has no knowledge of your situation at all and you are asking them to take on board things the lender (that they know nothing about) may do as a result of things you may have done (that they know nothing about).

V_for_viennetta wrote: »

My concept of fault? Well, the changes I proposed to the wording do not mention ‘fault’ – they mention that the buyer wouldn’t be liable if the mortgage offer is withdrawn for a reason other than misrepresentation or fraud. No one has yet explained why this would be ambiguous.

Well, thats not the impression you gave with your opening post.

I asked my solicitor if we can add a clause to the sale contract that says I am not liable (i.e. the seller cannot keep the deposit and cannot sue me) if the mortgage offer gets withdrawn and it’s not my fault, i.e. I want to be liable if I faked documents or lied to the bank, not if the bank changes its mind.

So, here's an example. You spend £250 on your credit card, lender 'unreasonably' decides this puts you over their limit on a random audit two days before completion.

You say this is the bank changing their mind and you did nothing wrong, they say its because of something you did. Legal rabbit hole ensues.
Or, you dont spend £250, indeed you dont spend anything on CC to avoid this scenario, but instead unreasonable lender decides this means you have undeclared amounts of cash and withdraws offer. Again whose "fault" is that and is the bank changing its mind autonomously or was it something you did or didn't do that instigated it? Legal rabbit hole ensues.
Dont get fixated on these specific examples, point is i"m just showing that there's a gray area that is not as cut and dried as you seem to think it is.

V_for_viennetta wrote: »

In my case, it's very simple: because otherwise I would not accept the seller's unusual demand of a 2+ month wait between exchange and completion. Why should I accept this unusual demand which exposes me to greater risks but offers me zero benefit etc etc?

You dont have to but I would propose an alternative solution such as exchanging later, taking a price decrease to allow for the extra risk or walking away.

I would certainly be concerned with someone who wanted more than two months to look for somewhere to rent.


You are of course free to add these terms and see what happens, I wouldnt accept them but them again i wouldnt ask for 2+ months which I think is also unreasonable if its just to allow for rental so maybe with two parties at odds, this just isn't going to happen. I'd be confident your sellers solicitor will strongly advise against and perhaps not even allow* them to agree this contract.
Do report back.


* eg if they accepted and it went wrong she may be held liable so if i was the solicitor I'd decline to work with those clients if they insisted on signing. Maybe YMWV

[Deleted User]

What you are asking for here is a conditional exchange surely? They are not uncommon.

I've just done one where we exchanged with the condition being that the gas safety report comes back fine. If it doesn't we can walk away, if it does then everyone is locked in

No one really likes doing them but they can be useful in certain cases

V_for_viennetta

Deleted_User wrote: »

What you are asking for here is a conditional exchange surely? They are not uncommon.

You mean conditional on the mortgage offer not being withdrawn?
Practically yes; have you ever seen any such case?
In fact, what I had in mind would potentially even give the sellers a bit more protection, because I was proposing to still be on the hook if the offer gets withdrawn for misrepresentation or fraud.

However, as you may have seen from the replies, I have been accused of all sorts of things!