Selling house to developers - is an index in our best interest

Why not make the indexing lopsided so that if they delay completion beyond two years they have to pay 100% of any index increase or can reduce the price by 50% of any index decrease? Or some other measure that makes the deal workable for you.

Or that any decrease is only halfway between the HPI decrease and the movement in RPI over the same period. If you have planned to receive £100k of proceeds at Christmas 2019 and they delay completion until 2020 or beyond, and house prices are down by 20% but your cost of living has gone up by 20%, you don't want to just receive £80k. Because unless all cash was exclusively going to be used for a further property investment you are going to feel out of pocket as well as having had your life on hold for years knowing that you might have to move house at any point in the next month whenever they get their act together. Not adequate compensation in my view.

Also, are you satisfied that if they have exercised the option in the first six months so that you definitely have to sell to them and cannot release cash from your property for anything from a few weeks to a few years, all that happens if they unreasonably delay completion to over the two years is that your eventual proceeds tick up by a few percent in line with house price index - or even goes down, if the index is down? What if you are waiting three or four years and you have other pressing needs for cash due to a change in your personal circumstances?

Personally I would be saying to the developer something like:

1) if you want an option to buy this house at some point in the next 6 months so I can't sell to anyone else, I will need a decent nonrefundable option payment and not just a promise that the eventual offer, *if* forthcoming, would be for more than the 'market value'. In other words you need to pay me to buy the option I'm granting to you which stops me selling to another party over the next 6-8 months while you consider if you're going to go ahead and exchange contracts and perhaps actually exchange them and perhaps not.

2) If we've exchanged contracts and are waiting for completion and you make me wait two years or more in limbo for my money, the eventual proceeds need to be at a bare minimum, at least as much as I would have got by waiting the two years plus and doing my 'above market' deal at that point, i.e. minimum increase of the house price index for England (if you're in England). Actually make it 'the greater of the HPI for England and the HPI for the UK' because I primarily want to keep pace with the local market but I might use the proceeds to buy elsewhere.

3) If we've exchanged contracts and are waiting for completion and you make me wait two years or more in limbo to access the cash from our agreed sale, I want the eventual proceeds to be at a bare minimum, at least as much in real terms as they are today using some inflation measure of consumer prices e.g. CPIH

So, I need
(a) an option payment when I sell you the option,

(b) a further nonrefundable deposit at exchange (which is enough to compensate me if you eventually walk away from the transaction and never complete by some arbitrary long-stop date e.g. 36 months from exchange because I can't wait forever just in case); and

(c) if completion does go ahead but occurs 24-36 months after exchange due to delays which are not my fault, I need the price to be the greater of that calculated under methods (2) and (3).

If the developer says he doesn't want to pay the greater of (2) and (3) because that means house prices could fall 30% from today's prices and he still pays more money than today's price, you could tell him it is his fault for not completing earlier, but maybe then compromise and say OK, if (2) is greater than (3) it will be (2), and if (2) is less than (3) it will be the arithmetic average of (2) and (3).

E.g. if inflation is 10% and house price fall is 30%, he pays you £90k (half way between £70k and £110k) per £100k of today's price.

Everything is a negotiation so you can put whatever you want in an option agreement. Presumably if they have prepared a contract they want you to sign, it contains everything that *they* want and not necessarily everything *you* want or everything they would be willing to pay for if they had to, for the opportunity.

If you have already taken professional advice and are happy with the consequences of going ahead, then who am I to interject. But it sounds like you are not happy with the potential consequences otherwise you wouldn't be asking here. So you need to decide what potential consequences you *would* be happy with, and ask for those instead.

getmore4less wrote: »

I can't see what is in this for you.

reminds me of the deal some neighbors to my dad struck with a developer to buy the bottom of their very long gardens, to be paid when the houses were complete and sold on, never saw a penny as the developer went bust.

Potential down side your developer goes bust and does not complete.
whats your place going to be worth next to a building site with an uncompleted house?

Exactly.....:money: There will be a fair few over-stretched developers around at the moment IMO.