Key Post Selling your home and buying another

Discussion in 'Mortgages and buying and selling homes' started by Brendan Burgess, Mar 15, 2010.

  1. Brendan Burgess

    Brendan Burgess Founder

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    The legalities of buying a house
    The sale is not binding on the buyer or the seller until unconditional contracts have been signed by both sides.

    So if you have agreed to sell your house and you have received a deposit, the buyer can still pull out and get their deposit back up until they have signed the contract for purchase.

    Although the purchaser is compelled to complete the sale once they have signed contracts, in practice, some purchasers are unable or unwilling to complete because the banks won’t lend them money.

    Buyer is trying to pull out after signing contracts

    Getting the timing right
    You can start the process of selling your house and buying another at the same time.

    You can agree to the purchase of a new house and pay a deposit but you should not sign contracts until the cash from the sale of your house is actually in your bank account. Otherwise you might have entered into a commitment to buy and not have the funds available.

    Can I sign a contract to buy subject to the sale of my own house?
    You can ask for this. The seller might accept it depending on how desperate they are.


    Can I sign a contract to buy subject to loan?

    You can ask for this. The seller might accept it depending on how desperate they are.

    Can I sign a contract to buy subject to survey?
    You can, but it makes much more sense to get the survey done before you sign the contracts.


    If your buyer wants to sign contracts subject to sale of their own home or loan approval...
    Make sure to put in a strict time limit, so that they don't have an indefinite option on buying your home.
    You should only agree to a "subject to sale of their own home" if their solicitor confirms that they have exchanged contracts for the sale.
    Can I transfer my cheap tracker mortgage to the new house?
    No. Once you sell your home, you will have to pay off the mortgage and take out a new mortgage on new terms.

    I am thinking of keeping my old house as an investment?
    Check out Sell house or keep as an investment?

    You may well be overexposed to property.
    You may be overborrowed.

    If you do keep your house, try to get your old mortgage onto interest only, as it’s more tax efficient
    Or you should consider buying a bigger house instead.

    The costs of selling and buying a house

     
  2. Brendan Burgess

    Brendan Burgess Founder

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    This used to be common-place. The seller would move out of their home in the morning and move into their new home in the afternoon.

    It requires such co-ordination now, that it is not worth attempting.

    What can go wrong
    Your buyer is unable or unwilling to complete. If they know you are desperate, they might even try to negotiate a price reduction at the last moment.

    The seller of the new home is not ready to complete because their new home is not ready yet.

    The best advice is to sell your own home first and arrange temporary accommodation until you close the deal and are ready to move into your new house
     
  3. Bronte

    Bronte Frequent Poster

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    As far as I remember it used to be common for contracts to have a mortgage approval clause and a subject to survey clause.

    They are perfectly normal clauses and if a vendor wasn't willing to allow them than the purchaser can decide not to sign the contracts and with power being with purchasers how can a vendor refuse?

    I actually think the mortgage approval clause should be specific as to amount as it seems people have mortgage approval for a certain amount one day and a lower amount when it comes to closing.
     
  4. mf1

    mf1 Frequent Poster

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    3,996
    Market forces dictate contractual power. Everything has shifted post boom. A few years ago, a vendor was likely to have a string of potential purchasers. They could pick and choose.

    At the moment, there are very few purchasers so if you, as a vendor, have a serious offer on your house, you will have to negotiate with the purchaser , on their terms. The alternative is to wait for another purchaser and you could be waiting.

    "Subject to survey", "subject to loan" and "subject to sale of my own" are all possible clauses that a purchaser can ask for. It is for a vendor to accept, negotiate or reject.

    There are still a great deal of naive people out there who believe ( pick any one of the following)

    1. The manager is a personal friend of mine and I will have no trouble with the loan.

    Solicitors reaction: we're doomed already.

    2. The house is terrific and we will have no problem selling it.

    Solicitors reaction: we're doomed and you don't have a purchaser do you?

    3. Whats the worse that could happen? We can always walk away from the contract!

    Solicitors reaction: we're doomed and you haven't a clue what a "binding contract" is.

    4. My friends bought and sold a few years ago and I don't remember any of this carry on. ( as in (a) you can't be very good and (b) you must be making this up!)

    Solicitors reaction: how hard is it to think your position through to its logical conclusion?

    5. I want to complete the sale and purchase on the same day.

    Solicitors reaction: you're not listening, you have no wriggle room.

    So, I would be of the view that until the money for your sale is in your bank account, that you should not commit to a purchase. In saying that, I have a client at one end of a chain full of "Subject to survey", "subject to loan" and "subject to sale of my own" clauses. My deal is an executor's sale. His view is if it sells and completes terriffic. But just don't spend the money just yet.

    mf
     
  5. Bronte

    Bronte Frequent Poster

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    That's very funny MF1. And all too true I imagine.
     
  6. Brendan Burgess

    Brendan Burgess Founder

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    MF

    If you have a large cupboard in your office, can I sit in it quietly and listen to your consultations? They must be absolutely hilarious.

    Brendan
     
  7. fizzelina

    fizzelina Frequent Poster

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    Last edited: Mar 15, 2010
    We recently completed our house purchase and as mentioned above we had a clause in the contracts when signing them that it was subject to the bank releasing the mortgage. We also had a clause that it was subject to the builder completing the finishing work within 3 months. It is a buyers market.
    The clause was that we would obtain the particular mortgage and amount which we had the approval for, the mortgage needed to be drawn down within 3 months.
     
    Last edited: Mar 15, 2010