Buy now or pull out? A few things to consider (no, I'm not predicting house prices)

SouthLondonUser

Understandably, there are lots of questions along these lines. Many people must have a better crystal ball than mine, as they seem very sure of what will happen to the housing market, while I have no clue. However, without trying to predict house prices, I wanted to highlight a few points which I think are key but which I haven't seen mentioned that often in these discussions:

• Financial situation and liquid savings: is your job really very safe? Will you have substantial savings even after buying? Are you sure you won't have to support other family members who may struggle? Unless I could answer yes to both, I wouldn't buy now - I'd much rather keep the money I had put aside for a deposit as a buffer for a rainy day.
• When will the new house be ready to move in? Do you need to refurbish? Good luck with that now. Do you need a removal company? Good luck with that, too. Even if you found one, do you want a team of strangers moving dusty dirty boxes and appliances right now? I know I wouldn't.
• If you can't move for a while and are renting, have you factored in that you risk paying rent + mortgage for quite a few months?
• Yes, it is true that the principal you repay as part of your mortgage payment is money you repay to yourself, so technically not a cost. However, that is also money you cannot easily get out of the house once you put it in. I.e. if you were to struggle financially, it would be much better to have, say, £10k more in the bank and £10k less of equity in the house, because the £10k in the bank you can use to pay for food and bills.

As everything in life, it's subjective and not everyone will agree, of course. But, even if you end up not agreeing, it would be prudent to at least consider these points.

SouthLondonUser

PS Another thing I would consider if you're in a chain is: what if the chain collapses between exchange and completion? 
AFAIK if your buyer pulls out between exchange and completion, and you can't complete as a result, you can sue your buyer but your seller can sue you. Not a situation I'd want to be in. I'd certainly discuss this with the solicitor(s). If they play this down and say it never happens, ask them how many global pandemics they have experienced - and then get a new solicitor!
Maybe there is a legal way to exchange subject to your buyers completing, I don't know, but it is definitely something worth exploring. And don't forget that, if you pull out now, it's not like your seller will be able to sell to someone else before this crisis is over.

Another risk is what if the bank withdraws the mortgage between exchange and completion. There was a post somewhere on how this is technically possible because mortgage offers can be withdrawn at any time. I see this as a much lower risk, because banks would then get politically crucified for making a bad crisis even worse, but the risk is not zero.

AdrianIsabel

SouthLondonUser said:

PS Another thing I would consider if you're in a chain is: what if the chain collapses between exchange and completion? 
AFAIK if your buyer pulls out between exchange and completion, and you can't complete as a result, you can sue your buyer but your seller can sue you. Not a situation I'd want to be in. I'd certainly discuss this with the solicitor(s). If they play this down and say it never happens, ask them how many global pandemics they have experienced - and then get a new solicitor!
Maybe there is a legal way to exchange subject to your buyers completing, I don't know, but it is definitely something worth exploring. And don't forget that, if you pull out now, it's not like your seller will be able to sell to someone else before this crisis is over.

Another risk is what if the bank withdraws the mortgage between exchange and completion. There was a post somewhere on how this is technically possible because mortgage offers can be withdrawn at any time. I see this as a much lower risk, because banks would then get politically crucified for making a bad crisis even worse, but the risk is not zero.

See

UK Finance have today confirmed that, to support customers who have already exchanged contracts for house purchases and set dates for completion, all mortgage lenders are working to find ways to enable customers who have exchanged contracts to extend their mortgage offer for up to three months to enable them to move at a later date.

If a customer’s circumstances change during this three month period or the terms of the house purchase change significantly and continuing with the mortgage would cause house buyers to face financial hardship, lenders will work with customers to help them manage their finances as a matter of urgency.

From Gov Advice Home Moving During the Coronavirus Covid 19 Outbreak (sorry but cannot post links yet).

SouthLondonUser

The second paragraph is the bit that worries me. If your financial circumstances don't change and you can get all parties, including lenders, to agree to an extension, brilliant (as long as you are happy with the risk that house prices may go down, that it may be harder to remortgage, etc).

But what if you lose your job in the meanwhile? Or if you're self employed and your income plummets? Will your seller, as has always been the case, still be able to sue you and keep your deposit if you have exchanged but don't complete? AFAIK the government has given no indication that this will change.

Hodge58

I have been in the finance side of the housing market for over 34 years until retirement 2 years ago. Most of that time as a Director and  i have seen the crash of 88 and the repossessions that followed as well as stock market crash etc.
As for house prices, don't expect a crash anytime soon in my opinion as there is still a population vs a supply factor.
But we have seen covid already cripple the biggest of companies and cashflow will be a problem for companies big and small.
If company A goes to the wall the any company that supply it will suffer. We trade approx 50% with europe and they are suffering the same problem so in my humble opinion then i would pull out of any transaction unless i have accident sickness and redundancy cover. But many companies have not sold this as they feared to be tarred with PPi which is of course totally different. If you have it then you have a degree of security but if you don't then you are probably too late as many providers pulled the redundancy aspect of this last week. If you  are a teacher, nurse, Doctor, Lawyer but not a conveyancing lawyer then great, your in a job for life but for retail or other occupations i would sit tight....Just my opinion. I have seen the Banks operate in adversity and they are ruthless despite their cosy images.

Thrugelmir

SouthLondonUser said:

Another risk is what if the bank withdraws the mortgage between exchange and completion. There was a post somewhere on how this is technically possible because mortgage offers can be withdrawn at any time. I see this as a much lower risk, because banks would then get politically crucified for making a bad crisis even worse, but the risk is not zero.

That's why new business is being curtailed. 

Hodge58

A lender can always pull an offer between exchange and completion or indeed after completion when they do final checks. (searches)

Thrugelmir

Hodge58 said:

A lender can always pull an offer between exchange and completion or indeed after completion when they do final checks. (searches)

Or there's a material change in circumstances that the applicants are duty bound to declare. 

SouthLondonUser

I am not sure how a lender would pull a mortgage after completion - there can be no completion unless and until the lender releases the funds! Maybe a lender can declare a mortgage loan immediately due and payable if they discover a fraud, but that's a different point. 

Hodge58

They can withdraw the offer and demand the money back if they suspect that you have lied. A classic case has been BTL who bought using a residential loan. The buyer does not register on the new property and they see this and pull the offer. I had to sack an advisor for this.

daveyjp

For industry advice this site is worth a look at.

https://www.conveyancingassociation.org.uk/

Downloads of current advice are on left hand side.