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New property Mortgage withdraw after exchange contract

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  • 09-11-2020 12:59pm
    #1
    c00114110
    Registered Users Posts: 47 ✭


    Hi Everyone,

    I am buying a new property. Got my mortgage approval, paid booking deposit and asking to sign the contract in 28 days. The property should be ready on April next year.

    However my solicitor alert me, because there is 4 or 5 months waiting time between contract exchange to close the deal, there is a risk that mortgage withdraw during this time, particular in this uncertain pandemic time. In that case, I won't enable to buy the property and lost my 10% deposit (not booking deposit).

    The seller solicitor refuse to change the contract to objective to loan closure. I want to know is this common particular? Does every new property buyer need to face this risk? Does anything I can do to reduce the risk?

    Looking forward to hear for you.
    Tagged:


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    #2
    Pablo_Flox
    Registered Users Posts: 586 ✭✭✭Pablo_Flox


    I would talk to your solicitor and take their advice. If they don't think that you should sign the contract the way that it is presented then trust them and don't sign it.

    I suspect that the Solicitor is highlighting it as a potential risk rather than advising against proceeding, but you would need to speak to him/her and get their professional advice. That is why you pay your solicitor!

    When I was buying my solicitor fought very hard to make sure there was a clause that the contract was subject to drawing down the mortgage. If they won't budge on it I am not really sure what you can do...


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    #3
    brisan
    Registered Users Posts: 2,242 ✭✭✭brisan


    Pablo_Flox wrote: »
    I would talk to your solicitor and take their advice. If they don't think that you should sign the contract the way that it is presented then trust them and don't sign it.

    I suspect that the Solicitor is highlighting it as a potential risk rather than advising against proceeding, but you would need to speak to him/her and get their professional advice. That is why you pay your solicitor!

    When I was buying my solicitor fought very hard to make sure there was a clause that the contract was subject to drawing down the mortgage. If they won't budge on it I am not really sure what you can do...
    I agree
    I would insist on a subject to finance clause


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    #4
    c00114110
    Registered Users Posts: 47 ✭c00114110


    Yes, my solicitor is highlighting the risk rather than advising against proceeding.

    You bought property before, you knew how hard to get this far. It is hard to us to give up.


    I will tell my solicitor insist on subject to finance clause, but are there any other ways to limit the risk?

    Does everyone buy new property need to face this issue currently?


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    #5
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    c00114110 wrote: »
    Does everyone buy new property need to face this issue currently?

    No, it's only some developers that refuse a "subject to finance/mortgage" clause.

    If the developer absolutely refuses the clause even after your solicitor pushes for it you either accept the risk or walk away.

    Personally, I'd be walking.


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    #6
    awec
    Administrators Posts: 53,433 Admin ✭✭✭✭✭awec


    Graham wrote: »
    No, it's only some developers that refuse a "subject to finance/mortgage" clause.

    If the developer absolutely refuses the clause even after your solicitor pushes for it you either accept the risk or walk away.

    Personally, I'd be walking.

    It's been a common enough point brought up on here for a number of years now, I am not so sure it's just some developers.


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    #7
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    awec wrote: »
    It's been a common enough point brought up on here for a number of years now, I am not so sure it's just some developers.

    :confused:

    It's common enough, from some developers. Not all, i.e. some.

    Some will also accept it if pushed. Again not all, some.


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    #8
    c00114110
    Registered Users Posts: 47 ✭c00114110


    Thanks Graham.

    I doubt seller solicitor can accept subject to finance clause. Because my solicitor already asked two times.


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    #9
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    Only other option is call their bluff. Threaten to pull out if they won't accept.

    Naturally you have to decide whether or not you will pull out.


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    #10
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


    There's another thread from another poster in exactly the same situation. Deciding whether they wish to take the risk or not.

    That poster managed to get a cancellation so is only looking at 1 or 2 months to completion.

    It did make me wonder what the original intended buyer had lost by cancelling.


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    #11
    Thoie
    Registered Users Posts: 6,344 ✭✭✭Thoie


    I had the same issue when buying a new house a few years ago - the developers refused to allow a "subject to finance" clause. In my case, they delayed so long I had to reapply for the mortgage, which was nerve-wracking, even though my circumstances hadn't changed. And of course, it meant another round of sending in paperwork.

    The mortgage offer probably won't be withdrawn, but it may expire. There's a few stages - Approval in Principle (which lasts a certain amount of time) then the Letter of Offer (which is also valid for a certain amount of time).

    If your circumstances don't change, you can have roughly 18 months from getting AIP to drawing down the mortgage.

    The main risk, which only you can evaluate, is whether you think your circumstances will change (lose your job, have a baby, something else) between now and April. I would also point out that while some developers may meet their scheduled timelines, if I was buying and they said "April", I'd assume I wouldn't be getting the keys until July.


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    #12
    awec
    Administrators Posts: 53,433 Admin ✭✭✭✭✭awec


    c00114110 wrote: »
    Thanks Graham.

    I doubt seller solicitor can accept subject to finance clause. Because my solicitor already asked two times.

    If they've asked twice and refused then you are just wasting time asking again.

    Your solicitor is doing their job advising you of the risk. Now you just have to decide, either you live with the risk or you pull out.


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    #13
    c00114110
    Registered Users Posts: 47 ✭c00114110


    Said, just got call from selling agency, said: developer will not accept any conditions.


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    #14
    brisan
    Registered Users Posts: 2,242 ✭✭✭brisan


    c00114110 wrote: »
    Said, just got call from selling agency, said: developer will not accept any conditions.
    The decision is your to make
    I would take your solicitors advice and walk away


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    #15
    c00114110
    Registered Users Posts: 47 ✭c00114110


    Thanks brisan. It is a hard decision.


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    #16
    Pablo_Flox
    Registered Users Posts: 586 ✭✭✭Pablo_Flox


    There are too many unknowns that could happen between now and next summer... I would have a long think about what you want to do; but my 2 cents on it is that it will sting to walk away, but it would sting even more if you end up loosing all your savings.


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    #17
    c00114110
    Registered Users Posts: 47 ✭c00114110


    Pablo_Flox wrote: »
    There are too many unknowns that could happen between now and next summer... I would have a long think about what you want to do; but my 2 cents on it is that it will sting to walk away, but it would sting even more if you end up loosing all your savings.

    Got your point.

    My wife and I did nearly a year house hunting, then got this property. Looks like we have to restart the hunting process.


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    #18
    Pablo_Flox
    Registered Users Posts: 586 ✭✭✭Pablo_Flox


    Could you delay signing the contract until January or February? That would make it less risky.

    Also, if you do decide to pull out and they then come back to accept the change to the contract; I would also try knock a few thousand off the agreed price! ;-)


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    #19
    Jet Black
    Registered Users Posts: 3,842 ✭✭✭Jet Black


    Its a hard decision and one that you have to make yourself. Solicitor can only really advise, look at your own circumstances and decide. I went through it too but the risk I took was losing deposit and I could be legally perused for the remaining balance of the house price. Lots of sleepless nights but it worked out in the end.


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    #20
    Thoie
    Registered Users Posts: 6,344 ✭✭✭Thoie


    One thing to remember when making the decision, if you're looking at any new build, this seems very common now, so another new build may have you in the same situation.


    To be honest, I'm not sure why developers have started doing this. If, for example, come closing time I no longer have mortgage approval, the builder would still be able to sell the property fairly easily with very little delay.


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    #21
    c00114110
    Registered Users Posts: 47 ✭c00114110


    Thoie wrote: »
    To be honest, I'm not sure why developers have started doing this. If, for example, come closing time I no longer have mortgage approval, the builder would still be able to sell the property fairly easily with very little delay.

    Exactly, that is unfair to the buying side. It left a huge risker for buyer (10% of deposit lost).


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    #22
    c00114110
    Registered Users Posts: 47 ✭c00114110


    I will have less worried if there is no pandemic. But in current pandemic situation, no one can really predict what happen in next year and plus potential no deal Brexit which add more uncertain to the future.


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    #23
    Dolbhad
    Registered Users Posts: 782 ✭✭✭Dolbhad


    Has your solicitor had a chat to their solicitor to see if there can be some sort of condition, even if it’s stricter the standard one the law society recommend recommend?

    The one builder in Cork I know who wouldn’t allow the clause was when my partner’s sister was buying a new build in Lehenaghmore, Cork. Her solicitor recommended like you to not proceed but did seem to give the builder’s solicitor and auctioneer a bolloxing over it.

    They came to a compromise. She would sign contracts with the subject to loan clause in it. However the builder would not sign contracts with the clause. The clause could only be removed when she had drawn down funds. The risk was there was no binding contracts in place and he could withdraw at any moment (esp if prices increased and he could get more money).

    But if builder did withdraw, she got her deposit back. She drawdown funds, builder returned contracts for the HTB and they closed a week later.

    Maybe something like that could keep both sides happy?


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    #24
    c00114110
    Registered Users Posts: 47 ✭c00114110


    Dolbhad wrote: »
    Has your solicitor had a chat to their solicitor to see if there can be some sort of condition, even if it’s stricter the standard one the law society recommend recommend?

    The one builder in Cork I know who wouldn’t allow the clause was when my partner’s sister was buying a new build in Lehenaghmore, Cork. Her solicitor recommended like you to not proceed but did seem to give the builder’s solicitor and auctioneer a bolloxing over it.

    They came to a compromise. She would sign contracts with the subject to loan clause in it. However the builder would not sign contracts with the clause. The clause could only be removed when she had drawn down funds. The risk was there was no binding contracts in place and he could withdraw at any moment (esp if prices increased and he could get more money).

    But if builder did withdraw, she got her deposit back. She drawdown funds, builder returned contracts for the HTB and they closed a week later.

    Maybe something like that could keep both sides happy?

    Thanks Dolbhad. That is good way to compromise for both party. I try to suggest this my solicitor.


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    #25
    Smouse156
    Registered Users Posts: 529 ✭✭✭Smouse156


    Just as someone that has worked in risk management previously, I have to say it would be a crazy risk to take! If it was a few k then fair enough but if it’s a full 10% then the risk is just too high. Trying to save 10% of a house on Irish after tax wages is a tall ask and if the gamble fails you might never have a house.

    As I someone looking to buy next year I’ll definitely be walking unless this clause is put in.


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    #26
    Thoie
    Registered Users Posts: 6,344 ✭✭✭Thoie


    c00114110 wrote: »
    Exactly, that is unfair to the buying side. It left a huge risker for buyer (10% of deposit lost).

    I suppose it's a handy 10% for the builder. If your circumstances change and you have to pull out, they get to keep your 10%, and can then charge a second person full price and pocket the profit. The only loss to them is a few hundred euro for their solicitor to send the paperwork to someone else.


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    #27
    Claw Hammer
    Registered Users Posts: 6,163 ✭✭✭Claw Hammer


    Some developers are availing of loan facilities to fund the build which is conditional on having unconditional contracts in place.


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    #28
    awec
    Administrators Posts: 53,433 Admin ✭✭✭✭✭awec


    Thoie wrote: »
    I suppose it's a handy 10% for the builder. If your circumstances change and you have to pull out, they get to keep your 10%, and can then charge a second person full price and pocket the profit. The only loss to them is a few hundred euro for their solicitor to send the paperwork to someone else.

    It is incredibly unlikely they'd do this. Clause or no clause, if you pull out you are more than likely going to get your deposit back.

    The effect of this clause is overstated at times. The biggest risk to your deposit is the developer going bust, and in that scenario this clause is irrelevant.


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    #29
    brisan
    Registered Users Posts: 2,242 ✭✭✭brisan


    awec wrote: »
    It is incredibly unlikely they'd do this. Clause or no clause, if you pull out you are more than likely going to get your deposit back.

    The effect of this clause is overstated at times. The biggest risk to your deposit is the developer going bust, and in that scenario this clause is irrelevant.

    If that is the case , why insist on the clause if you don’t intend to keep the deposit


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    #30
    Claw Hammer
    Registered Users Posts: 6,163 ✭✭✭Claw Hammer


    brisan wrote: »
    If that is the case , why insist on the clause if you don’t intend to keep the deposit

    The developers financiers insist on it.


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    #31
    Thoie
    Registered Users Posts: 6,344 ✭✭✭Thoie


    Claw Hammer wrote: »
    Some developers are availing of loan facilities to fund the build which is conditional on having unconditional contracts in place.
    awec wrote: »
    It is incredibly unlikely they'd do this. Clause or no clause, if you pull out you are more than likely going to get your deposit back.

    The effect of this clause is overstated at times. The biggest risk to your deposit is the developer going bust, and in that scenario this clause is irrelevant.

    I suppose that makes sense, kind of, but it's another one of those ridiculous areas where the consumer will "probably" get their money back, but "could" lose it all. For most people that 10% deposit is something that they may never be able to replace, or at least not for a very long time.

    Another clause in the original contract the builders sent was something along the lines of "if the developer goes bust, you have no claim at all on your original deposit". While people were willing to take the risk on mortgage issue, everyone point blank refused to sign the contracts with that bit in it, and eventually, after a few months, and every buyer's solicitor objecting, that was changed to the deposit going into escrow somewhere. I think as long as some people will chance the mortgage/change of circumstances clause, they'll keep including it.


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