Purchasing a new build apartment and may lose reservation fee due to mortgage offer not received

Memzy

Hi guys.

I'm purchasing a new build apartment which is due to finish very soon, in the comings week or two and by the time they issue certificates it should be around mid-April. The situation I'm currently in is that the developer has given me a final notice to have the contracts exchanged by 31st March otherwise my apartment will be cancelled or resold without further notice. 

The problem I have is that the mortgage lender cannot offer me a mortgage until they have have valued the property which they are saying will not be suitable for valuation until the end of April in which they can assess the report and provide a formal mortgage offer. This puts me in a very tight situation and I'm stuck in the middle. I've been advised and also wouldn't want to exchange contracts which puts me in a legally binding contract to then potentially find out the mortgage has not been offered.

I'm very wary of the situation with the lender/broker as I've had nothing but hassle with them. When I first received the AIP it was for a figure of £259,200 which the broker advised I can go ahead and put the £5k reservation on the apartment. After reserving, it then came back that the broker made a mistake in my student loan and the lender could only offer £251,750 so I sourced the difference so I don't lose the £5k. Then it came back that because the ground rent is 0.1% (which is fine) but at £288, they only allow a maximum ground rent of £250. The developer was accommodating in this but said it was unheard of. I provided an Experian credit report but the lender only uses Equifax so provided another one and once again, the lender dropped the amount they're willing to loan to £251,000 even though my there were no red flags of any sort, no loans, car finance ever, credit score of 999. Highly annoying at this point but it's only an extra £750 in the grand scheme of things. 

As you can see, it's been a headache and I'm very wary of the lender/broker so for me to exchange contracts and put a £40k deposit down and find out I don't have the offer, I cannot take that risk of losing everything I've saved for. However, it looks like I would lose £6.5k for the reservation/solicitor/broker fees in total. I'm stuck and unsure what to do.

Has anyone experienced this before and what can be done? How can they expect me to exchange contracts when I haven't received the mortgage offer yet. If I was to receive it then of course I would exchange and complete ASAP, on the same day if I could. These are all things out of my control. The broker never once explained the process to me as a first time buyer.

Please advise guys.

[Deleted User]

Memzy said:

 there were no red flags of any sort, no loans, car finance ever, credit score of 999. 

The 999 score is often a big bloomin' red flapping flag, as it implies a very thin file. But it seems your credit history was still good enough to pass the lender's criteria so far which is all that matters at this stage.

It would be foolish to risk exchanging with no offer. Equally, the developer is unlikely to ditch a committed buyer  as a new sale would be on a longer lead time. I would push back, pointing out that the valuation has to be done first.

Alternatively, you use a different lender, though that's not now going to get over the line in time.

user1977

Memzy said:

The problem I have is that the mortgage lender cannot offer me a mortgage until they have have valued the property which they are saying will not be suitable for valuation until the end of April

I take it they mean they want to value the flat after it's been built? That sounds odd (and unhelpful) - normally if you're buying off-plan then the lender will just do a desktop valuation (as often you need to exchange contracts while your shiny new property is still a muddy field).

If your broker knows that's their policy then it doesn't seem a smart decision to have gone with this lender.

666666

Sounds like your broker dropped the ball a few times but since it’s already up to this point, have you tried talking to a person from the developer side? If you explain your situation they might be more understanding especially if it’s out of your hand. Waiting for 4 more weeks I suspect would be preferable to them than finding a new buyer? However, if the lender is to do a valuation on the 30th of April you probably might still wait a few days before you get your mortgage especially if they are slow. 

Another option would be to go to a different lender I think the typical waiting time is around 2-4 weeks depending on the lender and if things go according to plan. Just make sure this time the broker do a better job and know what they need to submit and what the lender’s requirements are. Seeing as they made 3 glaring mistakes already with previous lender you might want to find a more competent broker. You’d still go over the 31st March deadline though. 

Memzy

Deleted_User said:

Memzy said:

 there were no red flags of any sort, no loans, car finance ever, credit score of 999. 

The 999 score is often a big bloomin' red flapping flag, as it implies a very thin file. But it seems your credit history was still good enough to pass the lender's criteria so far which is all that matters at this stage.

It would be foolish to risk exchanging with no offer. Equally, the developer is unlikely to ditch a committed buyer  as a new sale would be on a longer lead time. I would push back, pointing out that the valuation has to be done first.

Alternatively, you use a different lender, though that's not now going to get over the line in time.

Yes but they only lowered it after the lender said they found a commitment in my report which there was nothing. My brokers reckons it was the student loan which was exactly the first reason she gave me the first time they lowered it by £7450. 

I guess my only option is to plead with the developer. Failing that, it would be to lose the £6.5k I've already put in rather than the £40k deposit and then some...

Memzy

user1977 said:

Memzy said:

The problem I have is that the mortgage lender cannot offer me a mortgage until they have have valued the property which they are saying will not be suitable for valuation until the end of April

I take it they mean they want to value the flat after it's been built? That sounds odd (and unhelpful) - normally if you're buying off-plan then the lender will just do a desktop valuation (as often you need to exchange contracts while your shiny new property is still a muddy field).

If your broker knows that's their policy then it doesn't seem a smart decision to have gone with this lender.

Yes, they want to value the property once it's been built. Very unhelpful and that's the dilemma I am in as the developer wants me to exchange contracts but I can't under valuation has been conducted and the mortgage offer has been received. Should be built by next week or the week after...

Honestly, the worst headache I've had with this broker. These have been where all the issues have stemmed from as I've had no guidance from them. Their service has is not what I have paid for at all. 

Memzy

666666 said:

Sounds like your broker dropped the ball a few times but since it’s already up to this point, have you tried talking to a person from the developer side? If you explain your situation they might be more understanding especially if it’s out of your hand. Waiting for 4 more weeks I suspect would be preferable to them than finding a new buyer? However, if the lender is to do a valuation on the 30th of April you probably might still wait a few days before you get your mortgage especially if they are slow. 

Another option would be to go to a different lender I think the typical waiting time is around 2-4 weeks depending on the lender and if things go according to plan. Just make sure this time the broker do a better job and know what they need to submit and what the lender’s requirements are. Seeing as they made 3 glaring mistakes already with previous lender you might want to find a more competent broker. You’d still go over the 31st March deadline though. 

Yes indeed it has all been on the broker side! I haven't but I'm speaking with the estate agent who have a very good relationship with the developer as they've been involved with them on quite a few. I would have thought that too, they have a buyer in me, I'm ready with a deposit and near the last stages of purchasing but cannot proceed based on risk and mortgage offer. 

I don't think I can go to a new lender, the process would probably be more time-consuming. But thanks for you help, I'll have to plead that this is all out of my control but not sure how accommodating they will be.

eddddy

Is the developer a member of the Consumer Code for Home Builders?

(Who is providing the new-build warranty? The main warranty providers insist that developers sign up to the Consumer Code.)

If they are members, the Code says they have to refund your reservation fee - less admin charges - if you cancel....

The Reservation fee must be reimbursed if the Reservation agreement is cancelled.  The Home Buyer must be told of any deductions that may be made.

Link: https://consumercode.co.uk/the-code/the-code-requirements/

So that might reduce your losses, if you can't get this resolved.

Going off topic, but if they're not members of the Consumer Code for Homebuilders, you should be a little bit cautious. And you should check details of the warranty they're offering.

There are very few consumer protection laws to protect property buyers - so the quality of the warranty is important.

Memzy

eddddy said:

Is the developer a member of the Consumer Code for Home Builders?

(Who is providing the new-build warranty? The main warranty providers insist that developers sign up to the Consumer Code.)

If they are members, the Code says they have to refund your reservation fee - less admin charges - if you cancel....

The Reservation fee must be reimbursed if the Reservation agreement is cancelled.  The Home Buyer must be told of any deductions that may be made.

So that might reduce your losses, if you can't get this resolved.

Going off topic, but if they're not members of the Consumer Code for Homebuilders, you should be a little bit cautious. And you should check details of the warranty they're offering.

There are very few consumer protection laws to protect property buyers - so the quality of the warranty is important.

This is amazing, thanks so much for providing!

I need to double-check if the developer is a member or not. I'm assuming not since I've already asked the question and just checked the reservation agreement and it states:

"In the event that for whatever reason Exchange of Contracts to purchase the Reserved Property does not occur between the Seller and the Buyer within the Reservation Period then the Reservation Deposit shall be forfeited and no refund of the same shall be made to the Buyer and shall belong absolutely to the Seller".

I've signed this reservation agreement so more than likely I will not be able to recoup the costs back that I've worked so hard to save up for!

Will be interesting to see if they are a member of the Code and I've signed this agreement, doubt it but I will check now!

Thanks!

GDB2222

Is £5000 very high as a reservation fee? I thought £500 is more normal. 

£5k seems an awful lot to put down before you even get a solicitor involved. For all the OP knew when he/she handed over the £5k there might have been a legal issue with the property. 

Memzy

GDB2222 said:

Is £5000 very high as a reservation fee? I thought £500 is more normal. 

£5k seems an awful lot to put down before you even get a solicitor involved. For all the OP knew when he/she handed over the £5k there might have been a legal issue with the property. 

I genuinely don't know. When I was advised by my mortgage broker that the AIP was in place and I could put the reservation down, I thought that £5k was normal. Hadn't obviously done my own homework but they were the developer's terms in order to reserve a property. Wish it was £500 when I wouldn't have any second thoughts about walking away from the deal.