Should I complete my sale and exchange with a longstop date on my onward purchase??

CharYoung

Our buyers mortgage offer expires on Thursday and they cannot get an extension so the EA is suggesting we exchange and complete our sale on 30th and then rent back the property at a reduced rate from our buyer. The onward purchase would then exchange on the same day and our Vendor would have a long stop date of 26th August as her onward purchase of a new build does not have a completion date, they believe it should be in July, but the new build wont commit.  It seems legit and the EA states all the risk is on our Vendor as basically she is committing to completing with us by 26th August, before our mortgage offer expires on 3rd September and if her onward is not ready she will have to vacate and rent elsewhere.  Does this sound ok? it is not the normal way of completing but seems is the only option to avoid losing our buyer. my concern is if we complete and the onward doesn't we are effectively left homeless and would need to find something else, which we cant as we are priced out of the market now. The EA said by exchanging we are protected and we will definitely complete and move by 26th August. any advice or thoughts will be appreciated as we need to confirm by tomorrow if we are happy to go ahead

GentleGiant01

I would speak to your solicitor on the phone (or in person) and see what they suggest. Remember the EA is reliant on the sales going through to get their money so they aren’t the enemy either. 

I would ask your solicitor: 

> is there any legal problems that could arise by “renting” your current property? 

> if you exchange on your onward purchase at the same time as your sale, and then your onward purchase falls through due to your vendors, what exactly will they have to pay you? Will they have to pay your rent until you can find elsewhere? 

I think with this one you will have to weight up the pros and cons and only you can decide if this is worth it. I would however suggest, if you really are priced out of todays market, what have you got to lose by doing so? If you end up selling your house with nothing to move into, you will have to look at if you can afford to rent until such a time you can afford a larger deposit if that’s what will be required - but who knows what prices will be like next year, let alone interest rates. 

I know that new builds can be notoriously bad, but they don’t always over run. If the bones of the building are there and it’s water tight, I wouldn’t be too concerned. 

We exchanged with our vendor 5 or 6 weeks ago with no actual moving date and a long stop like you (they are moving into a new build) which was due completion July 15th. We’ve had notification that they now have a firm moving date of July 08th, so they are a little bit ahead, but from what I understand they are a small building company rather than one of these large ones. 

comeandgo

Will her mortgage allow her to be a landlord?  

Ath_Wat

"the EA states all the risk is on our Vendor "

No, there is a huge risk to your buyer, to the extent that they would have be an idiot to agree to it.   There is indeed a risk to your vendor, who probably will also not agree to it.

I wouldn't involve the estate agent in these talks, given that they are coming up with this stuff.  It's a matter for the solicitors and the parties involved.

GentleGiant01

comeandgo said:

Will her mortgage allow her to be a landlord?  

That’s a very valid point, and one for the buyers mortgage broker / solicitor to answer I think! 

Ath_Wat

"my concern is if we complete and the onward doesn't we are effectively left homeless"

Well no - you'd be left living in your rented house, which it would take up to a year, if not more, for your buyer to evict you from.  That's (one of the reasons)  why the buyer would have to be an idiot to agree this.

eddddy

CharYoung said:

Our buyers mortgage offer expires on Thursday and they cannot get an extension so the EA is suggesting we exchange and complete our sale on 30th and then rent back the property at a reduced rate from our buyer. 

The buyer will have a residential mortgage - not a BTL mortgage. So the buyer's mortgage lender won't allow this. 

CharYoung

GentleGiant01 said:

comeandgo said:

Will her mortgage allow her to be a landlord?  

That’s a very valid point, and one for the buyers mortgage broker / solicitor to answer I think! 

she has a buy to let mortgage and the lender is fine with it as long as we have an agreement, which has been drawn up to state we rent for 2 months from 1st July

CharYoung

Ath_Wat said:

"the EA states all the risk is on our Vendor "

No, there is a huge risk to your buyer, to the extent that they would have be an idiot to agree to it.   There is indeed a risk to your vendor, who probably will also not agree to it.

I wouldn't involve the estate agent in these talks, given that they are coming up with this stuff.  It's a matter for the solicitors and the parties involved.

Our buyer and vendor have agreed, the new build is due to be ready 29th July, and is on track so it is likely we would complete prior to 26th August, I will speak to the Solicitor today and get their thoughts

Ath_Wat

CharYoung said:

GentleGiant01 said:

comeandgo said:

Will her mortgage allow her to be a landlord?  

That’s a very valid point, and one for the buyers mortgage broker / solicitor to answer I think! 

she has a buy to let mortgage and the lender is fine with it as long as we have an agreement, which has been drawn up to state we rent for 2 months from 1st July

Ok, if they are buying the place as a buy-to-let business it does change the situation somewhat.  Even in the event you stay there I presume that they, if they have sense, will have the option of increasing your rent to a market rent and you staying on, which would probably suit them.  You will not be left homeless though; you will just be left renting.  They wouldn't be able to evict you quickly  and they probably wouldn't want to anyway,  they need a tenant.

CharYoung

GentleGiant01 said:

I would speak to your solicitor on the phone (or in person) and see what they suggest. Remember the EA is reliant on the sales going through to get their money so they aren’t the enemy either. 

I would ask your solicitor: 

> is there any legal problems that could arise by “renting” your current property? 

> if you exchange on your onward purchase at the same time as your sale, and then your onward purchase falls through due to your vendors, what exactly will they have to pay you? Will they have to pay your rent until you can find elsewhere? 

I think with this one you will have to weight up the pros and cons and only you can decide if this is worth it. I would however suggest, if you really are priced out of todays market, what have you got to lose by doing so? If you end up selling your house with nothing to move into, you will have to look at if you can afford to rent until such a time you can afford a larger deposit if that’s what will be required - but who knows what prices will be like next year, let alone interest rates. 

I know that new builds can be notoriously bad, but they don’t always over run. If the bones of the building are there and it’s water tight, I wouldn’t be too concerned. 

We exchanged with our vendor 5 or 6 weeks ago with no actual moving date and a long stop like you (they are moving into a new build) which was due completion July 15th. We’ve had notification that they now have a firm moving date of July 08th, so they are a little bit ahead, but from what I understand they are a small building company rather than one of these large ones. 

Thanks, on the face of it it looks ok as the new build is decorated it is just the drive to complete and have the NHBC inspection, which will then give the completion date which is likely to be in July, it is only because of our buyers expiry this has come up, if we had a couple more weeks then it would likely all fall in to place at the same time!. The main niggle is if we complete our sale and it falls through we will be left without owning a property, and as we are unable to increase our mortgage (we have 100k deposit from our equity) to go for anything else as the prices have gone up,we will lose in the long run as whilst we will have the equity in the bank we would then need to rent and not have the value in owning the property and any potential growth.  It is such a stress and I know only we can decide, I will speak to the solicitor, but thank you for your advice