Partial payment after exchange

london.cidade

I have had an offer accepted (£460k) for a house which turned out to be an unmortgageable house. My mortgage application was declined and the reason is "due to the nature of work required to complete the extension". A 80 m2 extension, interior needs completing, half of it plasterboarded, and the rest remains uncompleted.

We can try to purchase this house with cash, my max which we can raise  would be around £400k.

Would it be legally possible pay £400k , exchange then after one year pay the remaining 60k. So tax will be paid fully for £460k

Of course this is subject to the vendor's approval. Before raising it with them just wanna hear your experiences even if this is sth technically/legally possible, many thanks

Ps: Our position as a buyer is nothing to sell. Thanks

Brie

If the house is not mortgageable maybe the vendor needs to lower the price.

lincroft1710

I doubt the vendor would agree. 


Changing the subject an 80 sq metre extension is the size of a small 3 bedroom house, so understandable if a lender declined to lend.

eddddy

If the seller trusts you to do that, that's fine.

But...

• Can the seller afford to buy their next house if you underpay them by £60k?

• What will the seller do if you don't pay the £60k? (They could put a charge on the house, but going through the courts to get you evicted and the house sold to get their £60k would take a long time, and be expensive.)

Where would you get the £60k from in a year's time? Are you assuming you'd get a mortgage in a year's time...

• What money would you use to finish the house in the meantime, before applying for the mortgage?

• What if you can't get a mortgage?

• What if finishing the extension takes longer than a year?

user1977

As above, theoretically yes (assuming you mean "complete" rather than "exchange"), but why would a seller agree to that?

london.cidade

eddddy said:

If the seller trusts you to do that, that's fine.

But...

• Can the seller afford to buy their next house if you underpay them by £60k?

• What will the seller do if you don't pay the £60k? (They could put a charge on the house, but going through the courts to get you evicted and the house sold to get their £60k would take a long time, and be expensive.)

Where would you get the £60k from in a year's time? Are you assuming you'd get a mortgage in a year's time...

• What money would you use to finish the house in the meantime, before applying for the mortgage?

• What if you can't get a mortgage?

• What if finishing the extension takes longer than a year?

Hi Eddy, 

The sellers  split, the wife already moved out, the husband is living in but will rent once completed. So they will be short of £30k for each. They will get £200k instead of £230k.

This house needs at least £100k for  completing the remaining work. So we might well need more than a year. We will do diy as much as we can. Painting & flooring and plastering will be done by us, we will need to hire builders for the rest.

We will pay the remaining amount (£60k) together with my brother, it will come from our salaries. So we are not considering to apply for a mortgage.

Wrt sellers trust on us, thanks for the comment. i think this may be arranged with legally binding clauses between solicitors. Hopefully this can provide some assurances for the seller.

london.cidade

Brie said:

If the house is not mortgageable maybe the vendor needs to lower the price.

I will definitely have that conversation, what amount of decrease should we expect/target in that case? Thank you

lika_86

Unlikely given the split. Most couples who split want as much money as possible asap in order to set up their own lives as single people and may be needing to lower their expectations as to lifestyle in any event.

If there was certainty you would have the money, perhaps money being tied up maturing then that might help things but if you're planning on paying for it from salaries it would be a hard no way for me, what if you lose your jobs? 

Likely a total non-starter. 

user1977

london.cidade said:

eddddy said:

If the seller trusts you to do that, that's fine.

But...

• Can the seller afford to buy their next house if you underpay them by £60k?

• What will the seller do if you don't pay the £60k? (They could put a charge on the house, but going through the courts to get you evicted and the house sold to get their £60k would take a long time, and be expensive.)

Where would you get the £60k from in a year's time? Are you assuming you'd get a mortgage in a year's time...

• What money would you use to finish the house in the meantime, before applying for the mortgage?

• What if you can't get a mortgage?

• What if finishing the extension takes longer than a year?

i think this may be arranged with legally binding clauses between solicitors. Hopefully this can provide some assurances for the seller.

There's a difference between something being "legally binding", and being easy to enforce (or a good idea).

eddddy

london.cidade said:

Wrt sellers trust on us, thanks for the comment. i think this may be arranged with legally binding clauses between solicitors. Hopefully this can provide some assurances for the seller.

As above...

I can sign a legally binding document saying I will pay you £60k in a year's time.

But what will you do if I don't pay?

Either because I don't have £60k, or I simply decide not to pay you?

Maybe I'll lose my job, maybe I'll spend all my money on exotic holidays, maybe the building work goes way over budget - or maybe I'm just a nasty person, and I decide not to pay.

Like I say - why would you trust me to pay?



I can't really see anyone agreeing to that idea - especially if they ask their solicitor first.

Albermarle

lincroft1710 said:

I doubt the vendor would agree. 


Changing the subject an 80 sq metre extension is the size of a small 3 bedroom house, so understandable if a lender declined to lend.

As above it is a very large extension. How big is the original house?