Delay on exchanging contracts - is the developer likely to pull out?

Ronnie1864

My partner and I are buying a new build house and we're both first time buyers.

We're currently having a delay getting our mortgage offer through due to the lender being difficult on our loan amount (they're being nitpicky about something tiny and have misinterpreted something else), we've gone back with an argument on why they should loan the full amount quoted on our agreement in principle with documentation to back it up.

We've now passed the 28 day period our developer said they want us to exchange contracts within (1 week over as we reserved the plot on 1st March) they've chased us on our mortgage offer twice and have asked that we keep them up to date on what's going on with it. We're chasing our mortgage broker regularly but struggling to get anything back from the lender at the moment.

Whilst the developer have been understanding and patient so far I'm getting quite worried that they will eventually start threatening to pull out of the sale and release the plot back again if this goes on for too long. If our current lender doesn't offer the amount we need we'll have to apply with another lender, which will mean another delay of a few more weeks.

Is the developer likely to do this? The property won't actually be ready until July but I know they have sales targets to meet so I'm worried they'll start getting twitchy soon if we can't exchange when they want us to.

princeofpounds

Developers are often rather quick to threaten to pull out, thinking it will provide forward momentum, but realistically you are unlikely to lose the property unless the delay is really abnormal and they have other buyers queuing up.

krusty101

It took us 5 months from reserving to exchange and the developer were fine. The build was a bit delayed but we could have moved in about 1.5 months before exchange but our buyer was being a pain. I assume they knew we were further ahead than any new buyer would be. 

AdrianC

Ronnie1864 said:

We're currently having a delay getting our mortgage offer through due to the lender being difficult on our loan amount (they're being nitpicky about something tiny and have misinterpreted something else), we've gone back with an argument on why they should loan the full amount quoted on our agreement in principle with documentation to back it up.

I can't help feeling it may be helpful to investigate what's behind this...

I'm going to guess that their valuation does not agree with the contracted purchase price, so they're basing LtV on their valuation, which leaves you short?

AiP is "Yep, we'll theoretically lend you £X, if the property's right".
They need a certain LtV at their opinion of the value in order to protect them - and you - in the event of repossession. Remember, newbuilds fall in value the second you move in, and if there's a shortfall post-repo-sale, you are still on the hook for that debt.

Your reservation basically "bought" you 28 days to exchange contracts... 37 days ago. The developer would now be within their rights to let somebody else reserve it.

moneysavinghero

The fact that you are having difficulty getting the mortgage offer may make the developer nervous. If they have other buyers on a waiting list it might not be too long before they start digging out that list.

Thrugelmir

Ronnie1864 said:

 we've gone back with an argument on why they should loan the full amount quoted on our agreement in principle with documentation to back it up.

AIP is only a provisional subject to. It is not in any form a formal offer. 

What's the issue that's causing difficulty? Lenders have criteria , while you might regard it as nitpicky, rules are in place for a reason.