Seller is purchasing unfinished new build!

alternativereality

Hello all,

Just wondering if anyone has been in this position before and could impart some advice. 

We recently had an offer accepted on a lovely detached property.

We are currently renting, FTB, no chain.

The seller had to find a property. 

There was a bit of a bidding war going on and we won despite not even being the highest bidder. We mentioned we were FTB not in a particular rush and could work to timescales that suit the seller. 

The EA were very keen for us to choose their solicitors even giving very good rates but we chose an independent solicitors.

It’s been about two weeks.

Today we have been contacted by the  EA. The seller has decided to purchase a new build. This is likely to complete in December. But may be delayed till Jan (they say at the latest)

Just wondering what people’s thoughts are on this and anything I need to be aware off.

Will things just be on hold till December. What happens to our mortgage. 

I did say I was willing to work to timescales that suit the seller but wasn’t expecting it to be 6 months! And this is a period of 6 months where we have to continue renting. 

Also let’s say there is a second peak of Covid this may delay the development of this new build pushing back things furthur. 

We were willing to work to timescales but didn’t expect the seller to purchase a new build that wasn’t even built! Any thoughts opinions or previous experiences 

bpj

Assuming they are telling you the truth those timescales don't sound unreasonable at all to me. You won the property on the basis that you were willing to wait and 3-5 months is not long as these things go.

Doozergirl

Better than a chain with multiple links, all day long! 

The average time is 3 months, I suspect that has increased to 4 at the moment. 

Developers usually ask that exchange is within 28 days, so people are secure in the knowledge that they will
be moving, at least.  I'm not sure if that has changed at the moment, but even during the height of lockdown people were allowed to move house.  

There was no guarantee of you even being able to complete in that timescale with any purchase.  It is what it is, but I'd much rather that than a chain.  

pinkteapot

The timescale wouldn't worry me too much - chains can often take this long anyway.

The biggest issue you may have is if the developer wants your vendor to exchange contracts on their purchase in 28 days, with 'completion on notice'. Normally, when buying a second hand house, you exchange contracts with completion on a fixed date a short time later (couple of weeks or so). At the moment, due to covid, a lot of people are doing exchange and completion on the same day. New-builds are different. When buying a new build people exchange contracts with an open-ended completion date. It's called completion on notice because the builder gives notice as and when the house is ready, and completion is a short, set amount of time after that. 

So, why does this all become your problem? If the seller NEEDS to sell their house in order to fund the new-build, they will want to exchange contracts with you at the same time as exchanging contracts on their new place. If they don't, you could pull out and they would be stuck committed to buying their new-build without a guaranteed sale of their place. As a result, they'll want you to also exchange with completion on notice. 

If you agree to go down that route, make sure the contract has a long-stop date that is BEFORE your mortgage offer expires. Completion on notice can have a long-stop date in the terms, which means that if that date is reached and completion hasn't happened, the buyer can pull out. Mortgage offers are normally valid for six months, and what you don't want to risk is exchanging contracts then your mortgage offer expiring and you not being able to get a new mortgage at that point (e.g. due to change in circumstances). 

In normal times, all the above would definitely happen. As doozer said, I don't know whether new-build developers are still insisting on a 28 day exchange. So, first step is to ask the EA about that.

You have an alternative if the issue does come up - you could refuse to exchange with completion on notice and say you want the seller to go into rented/temporary accommodation. They may or may not agree - depends how worried they are about finding a new buyer if you pull out. 

getmore4less

Keep looking a better place may come up.
Hold off spending money on this one. 

iwb100

The timescale is fine. They could have spent a month or two being outbid on houses and conveyancing can take longer than 3 or 4 months sometimes especially if you ended up in a long chain. As above the thing you need to sort out is your mortgage offer expiry date - because for a new build you will be asked to exchange with no completion date. This is risky because it commits you but IF your mortgage offer expires and for example Covid gets worse or lenders criteria tighten you may not get another offer yet be legally committed to the purchase. That’s your risk here. So you need to speak to your solicitor give them the expiry date and ensure they understand the need to build in some protection for you. 

SharkMoney

The benefit of new build is that they will exchange quickly (so will you) but at least then the sale is contractually bound.  

The new build will take longer, everything is taking longer at the moment. 

getmore4less

 don't exchange without a get out clause for mortgage expiry or it getting withdrawn

You might also want to consider a long stop in case of newbuild delays. 

sb82

We are in a very similar position and worried about paying our deposit and exchanging contracts 5 months before the expected build completion date. What did you decide to do in the end? 

JamesJohnston02

We were also in a very similar situation as you sb82, with the vendors wanting to purchase a new build near Leeds. When it became clear that we had to exchange within the month, and an open ended completion date (expected to be 5 months in the future), we decided to withdraw our offer. 

Our vendor wasn’t willing to make any compromises (such as a long stop date/move into rental/some clause to protect us), with all the risk passed to us, which we found too much, especially with the state of the economy! 

sweetsand

Hi
Couple of points dear OP
You are in a good position
We have not bought in a chain for more than 20 years as they are nightmares.
Yours is good as chain free

you love the area and the house
Sellers indicated by picking you as quick buyers so they be serios However, they have changed their mind
Covid, anyones guess but IMHO and I pray I'm wrong, we've seen nothing yet as bad weather will aid the spread and
those that could not care about others and not follow SD rules.

If I was you - if i loved the house and the area a rare combo, I'd stick with it.

Then choice is yours.

I hope it works out

ATB