Top of chain house removed from market

mbugsy18

Hi,
just looking for advice. My chain at the top has come unstuck. The buyer survey came in £125k below their offer and the vendor has refused negotiation even though they had managed to get another £70k in the hope that was enough.
I am at the bottom of the chain but in a position to exchange and complete before the SDLT holiday ends. As I have already had to accept a reduced offer the savings on the SDLT is needed.
My vendor still wants to sell to me but doesn’t want to rent and put things into storage which I understand. Her daughters can’t help as one has no room and the other has major renovations going on.
for want of £55k I am afraid of losing the house so I wondered if I could loan the buyer at the top by remortgaging a BTL I have .
is this a good or bad idea?
Both are looking this weekend again for properties so I am keeping my fingers crossed all round for a good outcome and someone finds what they are looking for so I can go ahead.
it’s been a long stressful 8 months since I started the whole process with losing buyers, paying surveyors etc to find major problems that vendors were not willing to fix. So any advice would be appreciated.

FaceHead

So the lender at the top of the chain won't lend enough to support the offer, because they don't think it's worth that much, and the buyer therefore needs to make up the difference with deposit. 

If they borrow from you, or anyone else, that will be contrary to the lender's policy - you can't borrow to fund the deposit. 

Also, just don't do it, as it could easily end up costing you 55k. You don't know what the financial situation of this person is, and the fact the bank won't lend needs to be a red warning sign to you. 

The only thing you can do is to apply pressure to your vendor to sell. They don't want to go into rented, but they might have to, otherwise they'll be looking at a big delay or price drop once stamp duty kicks back in. 

Seashell517

You'd be better off paying your vendor to go into rented, but even that isn't ideal...

mbugsy18

Thanks for the advice. @seashell157 what do you mean by paying my vendor to go into rented accommodation I didn’t know that was an option.

AdrianC

mbugsy18 said:

Thanks for the advice. @seashell157 what do you mean by paying my vendor to go into rented accommodation I didn’t know that was an option.

Of course it's an option.

The person selling you the house agrees to move to a rented property, instead of waiting to buy somewhere.
You pay them to recompense them for their expense and hassle.

It depends on their agreement, naturally, and you've already said they don't want to. The likelihood of them changing their mind depends on the amount of recompense you're willing to offer. I'd suggest the maximum figure you're likely to want to offer is somewhere below the amount of SDLT a delay would cost.

lookstraightahead

Why are you even contemplating this - they are now saying they don't wish to sell, so I would walk away if they're not prepared to sell.

mbugsy18

Ok, I think I shall be patient and see what the weekend brings. But glad it’s an option to offer to pay to go into rented accommodation although I don’t think I could offer much as then any savings from SDLT is negated.

Seashell517

mbugsy18 said:

Thanks for the advice. @seashell157 what do you mean by paying my vendor to go into rented accommodation I didn’t know that was an option.

Your vendor would need to agree, but rather than paying money to a link of the chain that doesn't actually directly effect you (any idea that you'll be able to do this as a loan is a non-starter anyway), offer the vendor a financial incentive to break the chain. You'd need to figure out how much it's worth you to keep the sale on track, and hope that the vendor will see that as enough incentive to move twice.

mbugsy18

Thank you seashell517 and AdrianC I will see what happens after the weekend when all will have had time to view other properties and decide what they want to do. If I can offer an incentive to rent I will go down that path.

saajan_12

Re making a loan, that's a crazy idea. 
* The bank, who assess risk all day long, are wary of giving a secured loan, and you're thinking about an unsecured loan,,
* What timescale could they pay in - considering they've probably raided all the reserves / friends / family for the 70k, and this was money they were planning to pay monthly through the mortgage. Can you wait 30 years for it? 

* If they stop paying as an unsecured loan, you're chasing 55k through courts - you can't recover that sort of number through bailiffs threatening to take someone's TV.. you'd be in for a long term earnings attachment or possibly bankruptcy. What if they move country or you can't trace them to sue / recover? 

* If they stop paying and you had it secured on their property, you'd be a second charge behind the mortgage lender - so if house values dip or the costs of repossession are high, you may have little left. If the mortgage lender are out of the picture and you have to repossess, that's no small matter to get a repossession order, evict the tenants, sell the property to recover your money. A bank has teams to manage this and they diversify the risk with multiple borrowers. You're in a binary situation - either this person pays you or they don't, hence more risky.  

* In your pocket, your 55k should be getting you a return (or saving you mortgage interest). You'd have to charge interest to both cover your lost return, and also the risk if this person doesn't pay (and you incur costs to recover it). How would you even begin to price that? Plus you have income tax on the interest. 

* What if your plans / circumstances change and you need the money - any other investment, you would likely have more flexibility to cash in. Here, you're beholden to this person paying you - would you take out any other investment with an open ended minimum lock in period?

avawat20

mbugsy18 said:

Ok, I think I shall be patient and see what the weekend brings. But glad it’s an option to offer to pay to go into rented accommodation although I don’t think I could offer much as then any savings from SDLT is negated.

Not being funny but if you have £55k lying around to lend to strangers, why can't you use this for stamp duty costs if that ends up the worst case scenario?