To ask for some house advice

[MsChanandlerBoing]

My friend and I are both in the process of buying houses with our partners and she’s come to me for advice but I feel I know barely more than her so thought I’d ask on here.

They’ve exchanged on their house but not completed yet as it’s a new build and yet to be finished. They were probably a bit naive going into this and didn’t do enough research - they are slightly regretting the whole thing and are feeling trapped but have accepted it.

Now they are newly in a very good financial position (fortunes changed since buying the property) and she’s asking me whether it would be better to try and sell it within the next year (even if it means selling to go back to renting) and risk losing money or if they are able to put together another deposit to rent out the house and move somewhere else? I initially said to her to rent out the house because then they can ride out the drop of the property value but I realise I don’t know anything about the costs to the landlord of renting out a property so it could be an ever spiralling cost.

I don’t feel at all qualified to advise her but also don’t even know where to begin to point her because it’s such a foreign problem to me!

What would you suggest/advise?

Thank you for reading!

I should mention this conversation started off with her saying she doesn’t think she wants the house anymore which is why she’s asking this.

Once you exchange if you don’t complete your will lose your deposit (in almost all circs). Depending on how her fortunes have improved she may want to stalk to agent about this and see what situation is in her situation.

OP l am a Landlord, firstly unless it is in some way impossible, she should move in and try living there.......

If she really hates it and decides to rent it out there are a LOT of pitfalls for a first time Landlord.
Agencies can take over the management but they are expensive and often not very good.
The new regulations coming in mean it is going to be very, very difficult to evict any problem tenants so she would need at least 6 months mortgage payments put aside for this eventuality.
She would have to change her morgage to a buy to let mortgage and her insurance would have to be checked. It is not something to be taken lightly as it was many years ago.

The climate is very poor to sell so really the only sensible option would be to live there for a while.

Yes I think that’s the problem. From what she says their salaries have improved significantly (to the point that they would not be buying this house if they would do it now) but not so much that they can throw away a house deposit.

Short term loss for long term gain. We took a hit financially to move to where we wanted to be. A couple of years down the line we never thought about it.

Best option would be to live there for a couple of years, overpay the mortgage if possible (or stack some money away in savings if not) and then look at moving then.

It depends what the market is like for those properties. She can ask the estate agent about the general market to see if she can sell it before moving in but she'd lose stamp duty and fees. She can also ask the builders who she bought it from if they'll do a deal, e.g. If the deposit is £20k then agree to nullify the contract for £5k, which could then be her total loss (+ fees).

It may be possible for her to sell the house on before they even move in. Although from what you're saying they would need to take a financial hit to do so due to a falling market. The advantage of this strategy is that they would not have to bear the additional cost of losing the new-house premium. Even in a static market an uninhabited house is worth more than the same house that has been lived in for six months, just like a brand new car.

If they consider this they should speak to an agent about selling on immediately.

Does she like the estate but not the property? If it’s just that they can now afford more, the builder may allow her to transfer the deposit to another house on the same or a different development.

I think her main concerns are that they bought this house thinking ‘this is it’ and it was all they could afford so they ‘made do’ to get on the property ladder. Now that she sees they could afford better house and better location she’s worried that the loss of value of this house would stop them being able to make an upward move in the future. So far this phase of her development has sold out but next phase is building so may be difficult to sell after?

Yes she is obliged to buy it, but it is promising that this phase has sold out. If she really doesn't want it and there is time before completion she could try getting an agent to market the house and effectively sell the contract to someone else. I've done this in the past. She would not need to find stamp duty as the buyer would pay that so she would only have lost the legal fees. If the houses are in demand she may even be able to sell it for more than the deposit and legal fees.

However, she must make sure that she hangs onto the money to complete in case she doesn't get a buyer or the buyer does not deliver.

If no buyer then the problem is that if the value of the house is £x she has just paid £x plus stamp duty. How painful that is depends on the value of the house, but I'd be inclined to keep it and live in it for a bit or rent it out.

I'd also suggest looking at whether she will be allowed to rent out the property as it is a new build. We are house hunting at the moment and recently viewed a few plots on new build developments and the covenants state that the houses cannot be rented out. Gleeson is one, and I can't recall the other firms but worth looking into their restrictions. One development also said in their terms and conditions that we wouldn't be able to sell the property until all of their building work had been completed and the plots sold, another company said we couldn't sell within 12 months and were not allowed a for sale sign on the property. Some of the silly restrictions have put us off new builds.

there is a lot to consider . If they rent and buy another house the stamp duty could be double as a second house . The mortgage on the first house would have to be changed to buy to rent mortgage - this may or may not be possible and would be more expensive ( higher rate ) and being a landlord is not easy , I would think they would be better to move in and take their time before deciding what to do to be honest .

Thank you all for your replies.

I think moving in and seeing how things go is likely to be their best option. They don’t have long left at all until completion (if things stay on track) and I hope this may be just be cold feet and she’ll get through it. Trying to sell the contract seems the only way to ‘get rid’ of the house as such without huge financial penalty. Fingers crossed it all works out!

“Buyer’s Remorse” is quite a real thing - basically any house purchase feels like a huge commitment and loads of people think they’ve ‘got it wrong’. Usually it passes after a couple of months!

@MsChanandlerBoing - there was actually several other options in the advice you were given, including talking to the builders about negotiating to get a different larger property from them, or negotiating an amount lower than the deposit to break the contract. I'm not sure why you've discounted those options?

I'd move in and put the extra money into a pension. They can move in a few years.

It sounds like cold feet. It's not that there's anything at all wrong with this house, just that now they're aware they could hypothetically have bought something "better". It's a bit of an overreaction to be worrying about losing value and renting it out or renting instead of buying or losing deposits...

At the end of this they'll have a house to make their home. How is that bad to recognise the good you have, instead of the (slightly greedy) impulse to always want more and better just because?

Just because they've bought this house doesn't mean they have to live there for the rest of their lives. Thinking about homes as "forever" before you've even moved in ramps up the pressure unnecessarily and makes the stakes seem so much higher than they really are.

When I moved where I live now I thought of it as "this works for me right now, it doesn't need to be perfect or forever, it's fine to have stepping stones" and with a view on reevaluating where my life was as time passed and moving on.

Now I'm here and settled and it feels like my home, I'm really happy and have no interest in "upgrading" or moving unless I have to. I wasn't even that keen on the place at first but now I really like it!

There's value in not over extending yourself and being able to live differently. Their change in financial circumstances could enable them to live a much more secure life, with fewer worries and stress, and more opportunities to do things that matter to them or bring them joy than simply a bigger mortgage. Have they considered that?

There are far more possibilities open to them now than the "missed opportunities" they're focusing on. Surely that's exciting!?

@MRex sorry if it came across like that I was just expressing my opinion on their situation. A lot of you have given great advice about options that I didn’t even know existed and I’ve not discounted anything - I’ve shown her this thread and told her they have other choices. As they’re getting very close to completion they may just decide to move in as it’s not a bad house at all.

They’re planning on thinking through options and talk to their solicitors +/- developers tomorrow if they manage to get on the same page - if they can’t agree about whether they are willing to lose money they will keep the house and look at it as an investment instead of continuing to rent.

Is it one of those help to buy new builds houses
If it is I’m pretty sure you aren’t ablet to rent it out

To be fair, a smaller mortgage with loads of money put into overpayments and they could have a really sizeable deposit to move in a few years time.