Selling Property Question

[pontypool]

Had an offer on our house and am keen to sell, however the purchaser will only proceed if he can pay a small percent of the agreed price (about 5%) over the next 12 months.

Has anyone got expereince on this and any advice? Obviously would get a proper contract made up by solicitor but is there anything to watch out for?

[chris_w]

Sounds very odd if I've read that correctly. If he can afford 5% of the property price over a year then he can afford the mortgage repayments so should be making a clean offer for the full amount.

Unless I have misunderstood completely I'd say run a mile!

[pontypool]

I was told that this is not unheard of when dealing with very large sums of money but is unusual at the normal levels of house prices that this is. However, given the state of the market i don't want to lose out on the whole deal for this slightly odd 5%....

[Adam T]

Run a mile.

So how would you propose to tell your mortgage company this? You are not going to be fully discharging your mortgage for a yera?

I would run a mile, can this guy not get a mortgage?

Presumeably your still going to be paying for the mortgage over the year whilst he is paying you???

[Deva Link]

Do you mean he'll pay 95% now, and the 5% balance over the next year?

[pontypool]

Deva: Yes, that is the proposal. My mortgage is less than 95% so paying that off is not an issue.

[scotal]

Do you honestly believe he'll pay it? How will you enforce payment?
Sounds really odd to me.

[Adam T]

Ah, sorry, I miss interpreted the Info.

So he is not offering 95% of the asking price, but actually 100%, 95% now and the remainder in one year?

I would be interested to ask him what his reasoning behind this are, have had similar ish experience and the people tried to say they were not paying the extra money as they had ha dto do x y z to the property.

Maybe not strctly true at the moment, but if he wants to buy it, he should just pay up - is it that this guy cannot get the mortgage required?

[pontypool]

scotal - that's why I was wondering on here if anyone else had experience of it as it is a bit bizarre but obviously does happen now and again so wondered if anyone else had done it.

I guess if you really want somewhere and can't get all the finance together at once then it's the only option.

I would only consider it based on a contract drawn up by my solicitors that they could prove to me was watertight.

[stimmers]

Whats his motive for not wanting to pay 5%? Seems very odd that someone would offer 95% and say they will pay 5% later.

In fact it seems ridiculous to me

[jas xjr]

i sold a business a few years ago , i wanted out. the prospective owner could not raise all the cash, he paid me in instalments for the balance with interest,at a favourable rate(4% over base). i had a charge over the property. in the event he resold and had to pay me off,with the lost interest.

[scotal]

jas xjr said:

i had a charge over the property.

If the op does go down this route I think he would certainly want to look at this, however he will be 2nd charge after the mortgage lender.

Has he told you how he is intending to raise the extra 5%? Bearing in mind he will be payinng his new mortgage as well as whatever he's paying you each month.

Given the current climate I'm betting that you will be "renegotiated" by your purchaser due to lower property values. In effect he'll gazunder you after the deal is done,and with all the aces in his hand, i.e he'll have the deeds to the property and the cash in his account.

[Deva Link]

pontypool said:

I was told that this is not unheard of when dealing with very large sums of money but is unusual at the normal levels of house prices that this is. However, given the state of the market i don't want to lose out on the whole deal for this slightly odd 5%....

Not something I've ever heard of (but that doesn't really mean anything).

Is the issue that he has no equity and can only get a 95% mortage, therefore he's effectively asking you to loan him the deposit?

The other thought that occurs to me is getting 95% of what you want is probably pretty good at the moment - or is that irrelevant as the the point is that the buyer can only borrow 95% no matter what the agreed value?

[Olf]

Is he trying to avoid a stamp duty barrier?

On the basis that most buyers are going into the market offering 10% less than the asking price, AND if you're happy with the asking price then go for it. If you get the 5% great, if you don't you're no worse of than you would be if someone offered you 95% which is not unusual.

And besides you'll know where he lives if you need to make a visit

[JustinP1]

What I would say is if you take the 5% out of the equation - ie if you never see a penny of it, is it still a good deal?

If it is, then great, anything you get of the money is a bonus.

Maybe he is just trying to scrape the requirements together for the mortgage, and intends to pay it back. If so, perhaps look at some other kind of security.

[Piglet]

Deva Link said:

pontypool said:

I was told that this is not unheard of when dealing with very large sums of money but is unusual at the normal levels of house prices that this is. However, given the state of the market i don't want to lose out on the whole deal for this slightly odd 5%....

Not something I've ever heard of (but that doesn't really mean anything).

Is the issue that he has no equity and can only get a 95% mortage, therefore he's effectively asking you to loan him the deposit?

The other thought that occurs to me is getting 95% of what you want is probably pretty good at the moment - or is that irrelevant as the the point is that the buyer can only borrow 95% no matter what the agreed value?

That sounds like the scenario to me....

You could do it, you'd sell the property to him at 100%, he'd pay 95% and you'd have effectively an old style private mortgage for the final 5%, you'd get a second charge over the property and he couldn't sell or remortgage without discharging your charge. Some housebuilders worked some slightly creative schemes like this in the early 90's where they loaned buyers money to bridge negative equity to enable them to move into their new builds and then held second charges over the new build property.

I'm not sure it's a starter though, would his main mortgage company go for it? Won't they want to know that he actually has a deposit? What about stamp duty, legal fees etc, can he fund those?

Two main concerns for me, firstly in between exchange of contracts and completion you'd have no deposit from him, that effectively means that there is little incentive for him to complete if he changes his mind. OK you can sue him for breach of contract but if he's got no money you're not going to get anything. Secondly, assuming the housing market continues to go down over the next 12-18 months, your 5% investment is likely to disappear so if he defaults on the mortgage the mortgage co will force sale (simplistic approach) and you're 5% will be gone, there won't be enough money - it's exactly why mortgage co's won't lend 100% in this climate.

I'm guessing you're fairly desperate to sell or you wouldn't be thinking about this? IMO this isn't a go'er though, if he can't afford to buy, he can't afford to buy and you'll waste money on your legal costs before this goes abortive at a later date.

[pontypool]

An update on this...it seems that the last 5% is tied up in some financial vehicle that can't be accessed for some time, hence the request for this last lump to be over 12 months...

It also seems that there will be substantial cash being put in as well so it is not a 95% mortgage situation.

Is one able to put a charge over any other assets he might own or only the property?

[Deva Link]

Anything is possible, but you should talk to your solicitor.

[walm]

pontypool said:

An update on this...it seems that the last 5% is tied up in some financial vehicle that can't be accessed for some time, hence the request for this last lump to be over 12 months...

It also seems that there will be substantial cash being put in as well so it is not a 95% mortgage situation.

Is one able to put a charge over any other assets he might own or only the property?

In that case - he can give you some of that "substantial cash" and make the mortgage bigger.

[scotal]

walm said:

pontypool said:

An update on this...it seems that the last 5% is tied up in some financial vehicle that can't be accessed for some time, hence the request for this last lump to be over 12 months...

It also seems that there will be substantial cash being put in as well so it is not a 95% mortgage situation.

Is one able to put a charge over any other assets he might own or only the property?

In that case - he can give you some of that "substantial cash" and make the mortgage bigger.

Walm speaks sense. If he has substantial cash going in, he should be in a position to cover the purchase price in full on completion. I wouldn't dick around with this bloke any further to be honest.