Months between exchange & completion? FTBs buying house > vendor buying new build > advice welcome

SpotOn88

We are FTBs and had an offer accepted on a house on 22nd Nov.
Full mortgage application submitted yesterday (25th) and valuation booked in for 30th.
Solicitors are in place.

We have been made aware that the vendor is buying a new build which is apparently a small development and has an expected completion date of mid April '22. We are aware that new builds are often delayed.

The major concern we have is that we are being requested to exchange early doors with a potential completion a number of months away which is a long time for any number of things to potentially go wrong. This coupled with handing over the 10% deposit and passing it up the chain to the vendor so that they can use it towards the deposit for their new build leaves feeling us feeling uneasy.

We are due to meet with our solicitors next week and this will be discussed. We are potentially willing to wait up until just before our mortgage offer expiry date (if we get offered one) which if all goes to plan would potentially give the vendor up until the end of May '22 if there were any delays with the new build. We are not however willing to have an open ended completion date and have already agreed that we will walk away if the vendor doesn't agree to a completion date.

Just wondering if anyone has been in a similar situation and how it played out as well if there are any things that we need to be wary of?

eddddy

The developer will probably give your seller 10 days notice of completion (i.e. one day, the developer will say "Your house is ready - you've got to move in 10 days".)

So your seller would probably want to give you 10 days notice at the same time.


It sounds like you're saying you want a "long stop" date in your contract - of May 31st (or whenever your mortgage offer expires).

That means, if 21st May arrives and you haven't been given 10 days notice yet , you can walk away and get your deposit back.

But the developer and your seller would bothj need to agree to that.

pinkteapot

Whenever this happens, it's a case of the vendor forcing their problems onto the rest of the chain.

Firstly, as eddddy says, what you're talking about is a long-stop date. When you exchange with "completion on notice", instead of a fixed date, you can have a long-stop date if everyone else agrees. You'd be crazy to exchange without one, as it would trap you in the contract forever.

Secondly, the main risk with a very long period from exchange to completion is a change in your circumstances during that time (e.g. job loss) which means your mortgage offer gets pulled. Only you know your own circumstances and how big that risk is for you. 

Ideally, people buying new-builds would part-exchange their house, or break the chain and exchange and complete with you in the normal way, and go into rented/temporary accommodation if their new-build isn't ready in time. Of course they don't want to because getting you to do completion on notice means less hassle for them. But you absolutely can try to negotiate this if you want, suggesting you'll walk away if they don't do a normal exchange/completion with a short period in between. Depends how strong the market is where you are, how easily you think the vendor could get another buyer, etc. 

SpotOn88

Thank you both, appreciate your comments

Re building insurance I was under the impression that this had to be in place by the time contracts are exchanged? Does this cause any issues in terms of the potentially long gap between exchange and completion?

Mineral1

We were in your exact same circumstance and our solicitor refused to let us exchange until just before completion as the risk was too great of an issue between exchange and completion. I would doubt yours would allow much of a gap either but you'll find out when you speak with them.

If you want to proceed, prepare to be harassed weekly by the vendor and their estate agent to exchange and threatened with them pulling the sale time and time again, it will be a battle of how long you can put up with that for. For us it was 6 months from when we had our offer accepted to the vendors new build being completed and I wish we'd just found somewhere else with a less complicated chain as it was very stressful.

isplumm

SpotOn88 said:

Thank you both, appreciate your comments

Re building insurance I was under the impression that this had to be in place by the time contracts are exchanged? Does this cause any issues in terms of the potentially long gap between exchange and completion?

Hi

If you are buying a new build you will not need building insurance - if fact I would be shocked if you can even get it - talk to an insurance company.

Thanks Mark

isplumm

pinkteapot said:

Ideally, people buying new-builds would part-exchange their house, or break the chain and exchange and complete with you in the normal way, and go into rented/temporary accommodation if their new-build isn't ready in time. Of course they don't want to because getting you to do completion on notice means less hassle for them. But you absolutely can try to negotiate this if you want, suggesting you'll walk away if they don't do a normal exchange/completion with a short period in between. Depends how strong the market is where you are, how easily you think the vendor could get another buyer, etc. 

. 

Hi - This is what we did - part exchanged our house - very easy process.

badger09

isplumm said:

SpotOn88 said:

Thank you both, appreciate your comments

Re building insurance I was under the impression that this had to be in place by the time contracts are exchanged? Does this cause any issues in terms of the potentially long gap between exchange and completion?

Hi

If you are buying a new build you will not need building insurance - if fact I would be shocked if you can even get it - talk to an insurance company.

Thanks Mark

It is OPs vendors buying the new build, not OP

TripleH

If the vendor starts to hassle, the response is, 'fine you want to exchange now, then we complete sooner and you go into rental, simple' or you tell them you will exchange but expect a completion date to be specified.

Maintain that line. I'd also keep looking for somewhere else. We have a newbuild but it was finished before we offered (original buyer pulled out). We were meant to get another new build that was due August 2020, then December 2020, wasn't finished until April 2021.

I believe there is a development in Central Manchester that still looks far from finished that might be 3 years late?!

thegreenone

TripleH said:

If the vendor starts to hassle, the response is, 'fine you want to exchange now, then we complete sooner and you go into rental, simple' or you tell them you will exchange but expect a completion date to be specified.

Also, as far as I am aware, you are under no obligation to even speak to the vendor/developer/their EA, so please don't give out your numbers.  They can go through your solicitors. Who, I hope, will tell them exactly what TripleH has said above.

SpotOn88

Thanks all

We have decided that we are not willing to exchange early and then not complete for months, even if there is a longstop date

We feel there are just too many risks being passed down onto us as a result of the vendor buying a new build

If the vendor doesn't agree to exchange/complete in a normal manner then as disappointing as it is we'll have to forget about this house