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A close friend of mine and his wife have lived in rented accommodation since their home was repossessed in the last crash. His grandfather passed away a few months ago, leaving a house valued at 285K and some cash investments. My advice (being a housing bear) was to stay renting, sell his grandfather's place as quickly as possible and wait for the market to drop more before looking to buy somewhere well within the 285K, leaving them with a new house and a something left over to form part of a pension (neither of them have no pensions or significant savings).

Unfortunately, they found a place they fell in love with. Before I could say NOOOOO! they'd made an offer (312K) and within a very short space of time had borrowed 30K for the deposit and exchanged contracts. This is before even putting his Granddad's old place on the market! (they believed all the EA bull about how popular his garndad's village was at the moment etc. etc.)

Well, the inevitable (in my mind) has happened. They are now in a position where they have 3 weeks to complete on the sale or loose their deposit. They've had one offer on his Granddad's place of 240K, which they turned down.

It's currently looking like they will loose 30K and end up moving into his Granddad's place.

So the question is, is there any way they can get out of the contract and get their deposit (or some of it) back? Or are they totally screwed? Any advice would be appreciated.

Many Thanks.

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It would appear your advice to them to stay out of the property market should be heeded regardless of the state of the market. Some people are too innocent to look after their own affairs. Perhaps they should take advice from their solicitor - they would certainly have advised them against what they have done.

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Perhaps they should take advice from their solicitor - they would certainly have advised them against what they have done.

Maybe their only way out would be if the Solicitor didn't advise them thoroughly and they can put pressure on them.

Other than that they have 2 options. Stick tennants into Grandads place to help them pay the mortgage on the new place till its sold, or get a bridging loan and hope to God they sell quickly.

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Maybe their only way out would be if the Solicitor didn't advise them thoroughly and they can put pressure on them.

Other than that they have 2 options. Stick tennants into Grandads place to help them pay the mortgage on the new place till its sold, or get a bridging loan and hope to God they sell quickly.

Good point. Been a few years since I bought a place but now I think about it my solicitor always wants to know where the funds are coming from. i.e. he gets a redemption figure from the lender etc does a bit of arithmetic to make sure you have funds in place to proceed. My solicitor would never exchange contracts unless the funds were in place - normally a formal mortgage offer plus the proceeds of your own sale.

In this case the solicitor should have been aware that funds were not available to complete and the solicitor should not have exchanged. If I were the person in this mess, I would be seeing another solicitor pronto.

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Good point. Been a few years since I bought a place but now I think about it my solicitor always wants to know where the funds are coming from. i.e. he gets a redemption figure from the lender etc does a bit of arithmetic to make sure you have funds in place to proceed. My solicitor would never exchange contracts unless the funds were in place - normally a formal mortgage offer plus the proceeds of your own sale.

In this case the solicitor should have been aware that funds were not available to complete and the solicitor should not have exchanged. If I were the person in this mess, I would be seeing another solicitor pronto.

There isn't really anyway the Solicitor for either party should have allowed the deal to go ahead without knowing funds were there.

When we sold ours the FTB's were supposed to pay 10% deposit, but could only scrape together £1000! We had the choice of taking it and progressing, or calling it off. We took the risk but set the completion to 10 days after exchange to stop any messing around.

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I don't think you can hold your solicitor liable. The only way out of a binding contract is to negotiate with the vendor. Otherwise they will be liable not only for the deposit but may also for the vendors costs as well as interest on the amount owed.

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I don't think there is anyway they could, or should get out of that one. When they paid their deposit they would have signed a contract. It wouldn't really be fair to the sellers either for them to drop out now with no legal consequences.

I agree. It's not fair on the sellers. On the other hand, they will end up with the house, valued at 312K plus the 30K, and my friend ends up 30K down for being dumb. I'm just looking for anything that might help them out, I'd rather see them keep the 30K than the sellers. I blame BBC bias and Gordon Brown ;)

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I agree. It's not fair on the sellers. On the other hand, they will end up with the house, valued at 312K plus the 30K, and my friend ends up 30K down for being dumb. I'm just looking for anything that might help them out, I'd rather see them keep the 30K than the sellers. I blame BBC bias and Gordon Brown ;)

I am full yon the side of the seller's in this case. Imagine you where trying to sell a house, accepted an offer, taken of the market, EXCHANGED contracts one the house you are selling and the one you are going to buy (with all the fees incurred). Put down a deposit larger than the one you have recieved (moving up the chain, so buying a 400k house with 40k deposit). To find out that the buyer below you should not have exchanged in the first place.

The point of exchanging contracts before completion it to make the sale legally binding so you can't pull out. (otherwise what is the point of exchanging contracts?)

I think your friends are probably still legally required to by the house. I don't think just losing the deposit is the legal minimum.

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Re-negotiate with sellers and get a 2 monmth extension to completion date if poss. It would take them a month or two to get another buyer to the same stage and they may not get the same price (or prices might(!) fall). The seller, if reasonable and has no onward chain ought to agree - the seller could always line up another buyer in reserve.

The solicitor would have asked them to confirm they have funds lined up but he doesn't have to "ensure" they will arrive - they will have ticked a box somewhere I am sure along the way so the Solicitor is not going to be liable unless a complete muppet.

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I am full yon the side of the seller's in this case. Imagine you where trying to sell a house, accepted an offer, taken of the market, EXCHANGED contracts one the house you are selling and the one you are going to buy (with all the fees incurred). Put down a deposit larger than the one you have recieved (moving up the chain, so buying a 400k house with 40k deposit). To find out that the buyer below you should not have exchanged in the first place.

The point of exchanging contracts before completion it to make the sale legally binding so you can't pull out. (otherwise what is the point of exchanging contracts?)

I think your friends are probably still legally required to by the house. I don't think just losing the deposit is the legal minimum.

I think losing the deposit is the legal minimum. If I were the Sellers I wouldn't be too miffed at that. They get 30k and the chance to sell their house again.

If the worst came to the worst they could stick it on the market for 10% less, offsetting that against the £30k they've just taken.

I do agree, I would be on the Sellers side completely. One of the problems in the U.K at present is that people feel they shouldn't be held accountable for their mistakes.

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I think losing the deposit is the legal minimum. If I were the Sellers I wouldn't be too miffed at that. They get 30k and the chance to sell their house again.

If the worst came to the worst they could stick it on the market for 10% less, offsetting that against the £30k they've just taken.

I do agree, I would be on the Sellers side completely. One of the problems in the U.K at present is that people feel they shouldn't be held accountable for their mistakes.

We were told that if we backed out, not only would we lose the deposit, but the vendor could put the property back on the market, accept a lower offer and we would be liable for the difference between the price we agreed and the new price - so lose deposit + some more

Scarey stuff

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We were told that if we backed out, not only would we lose the deposit, but the vendor could put the property back on the market, accept a lower offer and we would be liable for the difference between the price we agreed and the new price - so lose deposit + some more

Scarey stuff

Oh crap, that would suck. I'll get them to check their contract.

Thanks for all the help guys, apreciated.

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We were told that if we backed out, not only would we lose the deposit, but the vendor could put the property back on the market, accept a lower offer and we would be liable for the difference between the price we agreed and the new price - so lose deposit + some more

Scarey stuff

Thats ******** (as in wrong).

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Thats ******** (as in wrong).

They took on a contractual obligation to buy the house, why should they expect to be able to get out of a contract at the buyer's expense?

It sucks if they didn't read the small print, but people shouldn't sign contracts unless they're serious about it.

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Obviously they will not be relying on a discussion board, with 30k at stake they must take professional legal advice.

In English contract law in general the chance of getting back a deposit having broken a contract of sale can be a grey area. But in contract law as it relates to property contracts I think it is a bit more predictable that deposits are not likely to be reocoverable.

The chances of getting back a 10% depost on a property transaction is very slim indeed. It is of course a theoretical possibility that the vendor can sue the defaulting buyer for any loss over and above that 10%, as mentioned above. However the vendor would have to prove that the market value was (at date of breach, in effect the agreed completion date in most cases) more than 30K less than the agreed price. Which is likely to be hard to prove. So basically if a buyer cannot complete or renegotiate, suing to get the deposit back is likely to be throwing good money (on legal fees) after bad; but in the case of a typical house, the risk of being successfully sued for money over and above that deposit is also small.

Hence options are likely to be (a) complete (maybe with bridging loan); (B) renegotiate completion date; © lose deposit, with a very small risk being sued for more than the deposit (of course that risk would be greater if property values halved suddenly....)

I would add that it seems very unlikely that a solicitor acting for buyers and knowing they did not have a reliable source of money to complete, would not have advised against going ahead. The solcitor should and usually would advise of the risks of going ahead with exchange in strong terms (and would have made a note saying they had given that advice). If the solicitor failed to give that advice, then it would worth consulting another solicitor pronto to get on advice on the prospects of negligence suit against that solicitor. If the advice was given and ignored, there is of course no comeback.

As noted, this is general info in this type of situation, it is not intended to be advice and should not be treated as such, your friends need professional advice.

Edited by contrarian

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Obviously they will not be relying on a discussion board, with 30k at stake they must take professional legal advice.

In English contract law in general the chance of getting back a deposit having broken a contract of sale can be a grey area. But in contract law as it relates to property contracts I think it is a bit more predictable that deposits are not likely to be reocoverable.

The chances of getting back a 10% depost on a property transaction is very slim indeed. It is of course a theoretical possibility that the vendor can sue the defaulting buyer for any loss over and above that 10%, as mentioned above. However the vendor would have to prove that the market value was (at date of breach, in effect the agreed completion date in most cases) more than 30K less than the agreed price. Which is likely to be hard to prove. So basically if a buyer cannot complete or renegotiate, suing to get the deposit back is likely to be throwing good money (on legal fees) after bad; but in the case of a typical house, the risk of being successfully sued for money over and above that deposit is also small.

Hence options are likely to be (a) complete (maybe with bridging loan); (b ) renegotiate completion date; © lose deposit, with a very small risk being sued for more than the deposit (of course that risk would be greater if property values halved suddenly....)

I would add that it seems very unlikely that a solicitor acting for buyers and knowing they did not have a reliable source of money to complete, would not have advised against going ahead. The solcitor should and usually would advise of the risks of going ahead with exchange in strong terms (and would have made a note saying they had given that advice). If the solicitor failed to give that advice, then it would worth consulting another solicitor pronto to get on advice on the prospects of negligence suit against that solicitor. If the advice was given and ignored, there is of course no comeback.

As noted, this is general info in this type of situation, it is not intended to be advice and should not be treated as such, your friends need professional advice.

Thanks a lot for that, I've since spoken to them and they're going to contact their solicitor in the morning as a starting point.

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I don't think you can hold your solicitor liable. The only way out of a binding contract is to negotiate with the vendor. Otherwise they will be liable not only for the deposit but may also for the vendors costs as well as interest on the amount owed.

Absolutely wrong. The solicitor is liable. You employ a solicitor to guide and advise you throughout the completion of a legal contract because they set themselves up as professionals and because, by definition, they have the experience and knowledge of the process that is needed. If a solicitor allowed a client to exchange contracts for the purchase of a property without checking the funds are available to proceed, that solicitor has been negligent.

If, on the other hand, the people in question said 'Don't worry, we will have the proceeds of another property sale to hand ... ' then they have no redress at all.

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In my opinion they have learnt absolutely nothing from the last crash and went through the devestation on a personal level. They should have been wise to falling prices and potential capital loss before puttting a whopping 30 grand down for deposit, deposits are only put down if you a) definitely know you are going to buy the item regardless of outside factors B) you can afford to right off the loss if you change your mind - they were in neither of these positions. They were bitten once before and threw caution to the wind and have been bitten again.

utterly ludicrously apathetically ignorant, i despair at how poor a decision they could make armed with hinsight of what they went through in the 80s/90s.

sorry i know it's harsh but true.

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In my opinion they have learnt absolutely nothing from the last crash and went through the devestation on a personal level. They should have been wise to falling prices and potential capital loss before puttting a whopping 30 grand down for deposit, deposits are only put down if you a) definitely know you are going to buy the item regardless of outside factors B) you can afford to right off the loss if you change your mind - they were in neither of these positions. They were bitten once before and threw caution to the wind and have been bitten again.

utterly ludicrously apathetically ignorant, i despair at how poor a decision they could make armed with hinsight of what they went through in the 80s/90s.

sorry i know it's harsh but true.

And, just to be a bit pedantic - they don't just lose their deposit if they fail to complete. The vendor has the right to sue them for the outstanding monies - so they can bankrupt them very easily. On the other hand, the vendor is 30k up on the deal and already choosing a car or holiday.

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And, just to be a bit pedantic - they don't just lose their deposit if they fail to complete. The vendor has the right to sue them for the outstanding monies - so they can bankrupt them very easily. On the other hand, the vendor is 30k up on the deal and already choosing a car or holiday.

He must think all his christmases came at once 30k up for doing bugger all.

They have no-one to blame but themselves, it beggers belief. Renting all these years and as soon as they get a sniff of homeowning again they screw it all up.. again.

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  • 301 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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