H E L P! Offer lowered bottom of chain - options

Parties03

Hi

in a nutshell 

offer at bottom of chain is decreasing by X amount (7%)
knock on to our buyers, they want to decrease the offer on our house by Y (X x 1.5) amount (7%) 
House we want to buy won’t move as we found this in December and agreed at below price marketed. 

Has anyone ever covered the loss to someone in the chain via a legally agreed cash payment on completion, as it would be much less of a loss to us than reducing the sale price. 

Or is this just not an option at all? 

Reasons to do this is amount X is achievable for us to cover and would keep our buyers at the same deposit so they won’t be worse off and can keep their offer on our house the same. 

If we re marketed I don’t think we would sell for the potential new offer price but we also can’t sell now for that as it’s too low for our onward purchase 

Thanks  

Lomast

Why have they reduced their offer, do they just think its overpriced now or have their mortgage down valued?
Unlikely to work unless they can cover the loss without effecting their affordability mortgage lenders will not be interested in cash payments on completion.

Annisele

Assuming your buyer needs a mortgage, your plan is very unlikely to work.

It sounds as though your buyer now wants you to reduce your price by 1.5x (not just by x), so an offer of x isn't likely to be super attractive to them anyway. But even if it is, if they don't tell their lender about it they'll be committing mortgage fraud. So now their lender is going to think your property is really worth the lower of "lender's valuation" and "agreed price less x". That might have loan to value implications, and mean your buyers actually can't keep their offer on your house the same.

anselld

Normally if a reduction is passed up the chain everyone takes the hit in diminishing amounts, eg your buyer -X, you -2/3X, your vendor -1/3X.   Your vendor not playing so perhaps buyer -X, you -1/2X.   However, buyer asking for -1.5X is just taking the mick.  Personally I would be inclined to say no  and that is what they should have said to the bottom, but worst case no more than 1/2X reduction.

Cash in brown envelopes can never work whatever the numbers.

Parties03

anselld said:

Normally if a reduction is passed up the chain everyone takes the hit in diminishing amounts, eg your buyer -X, you -2/3X, your vendor -1/3X.   Your vendor not playing so perhaps buyer -X, you -1/2X.   However, buyer asking for -1.5X is just taking the mick.  Personally I would be inclined to say no  and that is what they should have said to the bottom, but worst case no more than 1/2X reduction.

Cash in brown envelopes can never work whatever the numbers.

Yeah I think it’s a ridiculous amount as it’s 10s of thousands. However I’m not sure we would get this number if we re marketed now. 

Thanks all about the cash idea it didn’t actually occur to me haha

eddddy

Parties03 said:

Has anyone ever covered the loss to someone in the chain via a legally agreed cash payment on completion, as it would be much less of a loss to us than reducing the sale price. 

Or is this just not an option at all? 

Reasons to do this is amount X is achievable for us to cover and would keep our buyers at the same deposit so they won’t be worse off and can keep their offer on our house the same. 

It's not a (legal) option.

If this was agreed via solicitors, the buyer's solicitor would inform the buyer's mortgage lender. They would treat it as a price reduction, and need to make a new mortgage offer at the reduced price.

If it was agreed secretly (not via solicitors, without mortgage lenders knowledge), technically it's mortgage fraud. Plus the buyers have no guarantee that you'd actually pay them.

(If you refused to pay, the buyer can't really take you to court and say "We were trying to commit mortgage fraud, but the seller didn't play their part in the plan.")

Parties03

eddddy said:

Parties03 said:

Has anyone ever covered the loss to someone in the chain via a legally agreed cash payment on completion, as it would be much less of a loss to us than reducing the sale price. 

Or is this just not an option at all? 

Reasons to do this is amount X is achievable for us to cover and would keep our buyers at the same deposit so they won’t be worse off and can keep their offer on our house the same. 

It's not a (legal) option.

If this was agreed via solicitors, the buyer's solicitor would inform the buyer's mortgage lender. They would treat it as a price reduction, and need to make a new mortgage offer at the reduced price.

If it was agreed secretly (not via solicitors, without mortgage lenders knowledge), technically it's mortgage fraud. Plus the buyers have no guarantee that you'd actually pay them.

(If you refused to pay, the buyer can't really take you to court and say "We were trying to commit mortgage fraud, but the seller didn't play their part in the plan.")

Thank you - I actually didn’t realise any of this and it’s complicated to arrange it in a way that would work (we reduce ours by the same 20k and arrange via solicitors to pay our buyers this amount on completion.)  I know it’s only my word but I would stay good to that but it’s a risk for them and maybe. 

I was told by my mortgage advisor that a reduced purchase price on the same property would not require a new product but it wouldn’t work anyway as them losing 20k on their sale changes the LTV so we can’t actually do this anyway. 

housebuyer143

Parties03 said:

eddddy said:

Parties03 said:

Has anyone ever covered the loss to someone in the chain via a legally agreed cash payment on completion, as it would be much less of a loss to us than reducing the sale price. 

Or is this just not an option at all? 

Reasons to do this is amount X is achievable for us to cover and would keep our buyers at the same deposit so they won’t be worse off and can keep their offer on our house the same. 

It's not a (legal) option.

If this was agreed via solicitors, the buyer's solicitor would inform the buyer's mortgage lender. They would treat it as a price reduction, and need to make a new mortgage offer at the reduced price.

If it was agreed secretly (not via solicitors, without mortgage lenders knowledge), technically it's mortgage fraud. Plus the buyers have no guarantee that you'd actually pay them.

(If you refused to pay, the buyer can't really take you to court and say "We were trying to commit mortgage fraud, but the seller didn't play their part in the plan.")

Thank you - I actually didn’t realise any of this and it’s complicated to arrange it in a way that would work (we reduce ours by the same 20k and arrange via solicitors to pay our buyers this amount on completion.)  I know it’s only my word but I would stay good to that but it’s a risk for them and maybe. 

I was told by my mortgage advisor that a reduced purchase price on the same property would not require a new product but it wouldn’t work anyway as them losing 20k on their sale changes the LTV so we can’t actually do this anyway. 

£20k is much too large to give someone as a cash payment on completion, the solicitors will know right away you are technically reducing the price while defrauding the lender.

It has correct that a change in price doesn't mean you need a new product, however if the LTV changes and they move into a higher band, say 75% from 60% then they will lose the product and choose a new rate. 

Parties03

@housebuyer143

yes makes sense.  Definitely not trying to defraud anyone just looking for the least expensive way to reach a suitable conclusion to this! Seems there is not really one. 

silvercar

All subject to negotiation, but there is an argument that £Xk of the lowest price property in the chain is more meaningful than £Xk of the top of the chain. Maybe those at the top should contribute more of the gap.

Sarah1Mitty2

Parties03 said:

@housebuyer143

yes makes sense.  Definitely not trying to defraud anyone just looking for the least expensive way to reach a suitable conclusion to this! Seems there is not really one. 

Most suitable conclusion would be the person you are buying from reducing to suit the chain, that is the best way to make it work.