Any solicitors dealt with this issue before- buying parents home?

Leonberger

Hi. Sorry second time I’ve posted about this but it’s easier than finding the old post.

We are selling our current house to parents and buying the family home from them. They are buying ours cash from the equity produced with the sale of theirs as they wanted to downsize and we wanted to upsize so seemed like the logical option.

We are buying theirs with a mortgage and deposit. 

So effectively a house swap but a buying each others houses. Both houses are sold at market value.

However solicitor is asking who will release funds first? They won’t have the cash until we complete I presume however we need the equity from the sale of ours for the mortgage deposit? 

We don’t have the spare money to front the deposit first so need to sell ours for that but then parents can’t buy ours without the equity from theirs being released upon their completed sale. 

Obviously I am not a solicitor and don’t have a clue. Are we stuck in some sort of impossible circle here or have the solicitors got it wrong? 

davidmcn

I think the solicitors are confused.

In a "normal" transaction, your mortgage lender can't release the loan funds without knowing that they'll get a valid mortgage, you can't grant a mortgage until you complete your purchase, and you don't want to complete the purchase until the vendor redeems their mortgage - which they're doing with your money. You don't start worrying about "who moves first", you just make sure it all happens simultaneously.

So same principle here - as long as everything can happen, you just get on with it.

Slithery

Leonberger said:

Hi. Sorry second time I’ve posted about this but it’s easier than finding the old post.

Nope. It's easier to find the old one than to type it all out again. Just click on your name and then 'Threads'. I presume that it was this one...

House swapping

Leonberger

Thanks David that’s great, really put my mind at rest.

My parents solicitor has asked who will release funds first, as neither can complete without funds being released so effectively they think we would be stuck in some sort of fund releasing limbo. They are concerned about who releases funds first but I have no way of knowing that!

So basically our parents by our house (A) the funds from their house (B) and then we buy house B with a mortgage but need the deposit from house A once our mortgage is paid. 

It has my head hurting just thinking of how it would work.

Glad to hear this isn’t the case as we were thinking the whole thing may fall through! 

Leonberger

Slithery said:

Leonberger said:

Hi. Sorry second time I’ve posted about this but it’s easier than finding the old post.

Nope. It's easier to find the old one than to type it all out again. Just click on your name and then 'Threads'. I presume that it was this one...

House swapping

That’s the one thanks!
I was happy with the original advice until parents solicitor starting confusing matters- Mustn't be that common of a situation if they are asking me what to do. I haven’t the first clue about conveyancing! 

Thrugelmir

Your parents obtain short term bridging finance to fund the purchase of yours? On the assumption that there's sufficient equity in their property. 

GDB2222

This is all nonsensical. @davidmcn has already answered. It all happens simultaneously, which is what happens in a normal transaction. If your parents have a solicitor who doesn’t understand that, they might have to appoint someone else to act for them.

Leonberger

Thank you to you all.
Im pleased to hear the solicitor has made a mistake. My solicitor has not mentioned any issue hence I was confused as to why parents solicitor has rang to ask this question. We were all racking our brains to try and understand what he was talking about. 

Parents are unable to obtain any sort of finance, they are downsizing due to financial issues. 

oldbikebloke

it is not all nonsense and the solicitor has a point.
People appear to have missed the issue revolves around the fact there is no up front cash deposit. The normal position for selling is someone somewhere in the chain has to put down real hard cash to start the process. that cash then moves up the chain as each party exchanges contracts and pays over their deposit (which may, or may not, need to be partially topped up by each person depending on what their contract requires.)

OP says they can't, as their "deposit" is the equity release from their sale. So they cannot pay that upfront.

However, as this is a swap transaction, there is no reason why it cannot be simultaneous provided the lender is happy to release finds before the deposit arrives. In that sense the solicitor is perfectly correct to be "concerned" about who goes first since the solicitor has a duty of care towards the lender to protect them. I agree in most cases this is hypothetical, but things do go wrong and the person that went first could lose.

davidmcn

oldbikebloke said:

it is not all nonsense and the solicitor has a point.
People appear to have missed the issue revolves around the fact there is no up front cash deposit. The normal position for selling is someone somewhere in the chain has to put down real hard cash to start the process. that cash then moves up the chain as each party exchanges contracts and pays over their deposit (which may, or may not, need to be partially topped up by each person depending on what their contract requires.)

OP says they can't, as their "deposit" is the equity release from their sale. So they cannot pay that upfront.

However, as this is a swap transaction, there is no reason why it cannot be simultaneous provided the lender is happy to release finds before the deposit arrives. In that sense the solicitor is perfectly correct to be "concerned" about who goes first since the solicitor has a duty of care towards the lender to protect them. I agree in most cases this is hypothetical, but things do go wrong and the person that went first could lose.

Sorry, you've lost me. Your lender won't care whether the equity you're contributing has come from real hard cash or the simultaneous sale of your old property. The contractual deposit is nothing to do with the lenders, it's just a form of security if there's a breach of contract - which won't be needed in the OP's case anyway.

Leonberger

oldbikebloke said:

it is not all nonsense and the solicitor has a point.
People appear to have missed the issue revolves around the fact there is no up front cash deposit. The normal position for selling is someone somewhere in the chain has to put down real hard cash to start the process. that cash then moves up the chain as each party exchanges contracts and pays over their deposit (which may, or may not, need to be partially topped up by each person depending on what their contract requires.)

OP says they can't, as their "deposit" is the equity release from their sale. So they cannot pay that upfront.

However, as this is a swap transaction, there is no reason why it cannot be simultaneous provided the lender is happy to release finds before the deposit arrives. In that sense the solicitor is perfectly correct to be "concerned" about who goes first since the solicitor has a duty of care towards the lender to protect them. I agree in most cases this is hypothetical, but things do go wrong and the person that went first could lose.

I think you’ve explained better than me what they think the issue is.

I just want to know there’s a way around the problem if it even if a problem as the solicitor was asking me but obviously I don’t have a clue!