Reducing offer close to exchange

[ChocHaloTop]

Will give some background to avoid drip feeding. I am currently in a chain of two properties, close to exchange. Both went on the market back in August, before Truss came into power and the cost of living crisis blew up. In my area, the market has fallen and properties are now going for about 10% below current asking prices, which in turn are lower than they were back in August.

I am the middle of the chain, with first time buyers buying my flat. I went for a conservative listing price and quickly sold for an asking price offer.

The flat I am buying is owned by a couple who have a portfolio of properties and decided to sell one (previously rented). They are not in a chain and were aggressive about getting the maximum price for the property (declining asking price, and pushing for best and final offers between two bidders). I put in an offer at 10% above asking price and got it.

It was the upper end of my budget and will take all my savings, which I was ok with at the time as I was expecting to be able to build them up again quickly enough. Now I have to think about the reduced value of the property (could be as much as 20% under what I am paying) and also short term realities of living costs, job insecurity, etc. that we will be facing over the next few years. I have spoken to a friend in finance who knows this market and says it is unlikely to recover even to the original asking price in the next 5+ years. The flat also carries a lot of associated maintenance costs due to the development it is part of, so inflation will impact those as well as the overall property value. I am single, so all costs are on me alone. I need to reduce my offer to make it viable.

Obviously reducing the offer will piss my vendors off, but I intend to drop back down to the original asking price, which I don't think they would get in today's market and so still feels generous. As well as the market drop, it is an unusual property and only had two bidders after 12 weeks on the market in the first place. Given their circumstances, I don't feel bad from a moral perspective as I might otherwise.

FWIW everyone in the chain is a childfree professional and staying in the same area, so if the chain were to collapse it would not be ruining lives!

My question is, how do you go about reducing an offer at this stage? We have not reached exchange - can I simply instruct my solicitor to do it? Are there any legal risks or considerations? I know that I risk collapsing the chain and also could lose money spent so far, but that is preferable to getting into an untenable financial situation for the long-term.

Any advice on how best to approach this would be greatly appreciated.

Well you risk collapsing the chain and pissing off both your vendor and buyer and wasting the money you and they’ve spent. You’ll also likely lose your mortgage deal and any future one will be more expensive as rates have gone up.

It’s a crappy thing to do.

As to the practicalities you tell your solicitor

It might be crappy, but it's also the reality of a dramatically changed economic environment. I'm not making money, I am protecting myself from paying the wrong price in today's terms and getting into an untenable situation.

Check what would happen to your mortgage offer - would a new one have to be issued for the new price (assuming the sellers say yes), and if so would it be in the same terms?

My cousin is selling and has just had an offer reduction very close to exchange for the same reasons. She received an email from the buyers solicitor telling her that they wanted to reduce their offer so I would imagine you would instruct your solicitor.

I'd dump you as a buyer and put the property back on the market. That feels like blackmail, and you should never give into blackmail.

You'd lose your mortgage offer, all the time you already have invested, survey and search costs etc.

Pricing is always like this. You have to decide what the property is worth to you, and stick with it.

It's not blackmail. That's ridiculous.

It’s morally wrong, and crappy is right. However you hold all the cards. Speak to your solicitor who will advise you how to go about it and any implications especially mortgage offer.

I can understand your reasoning, OP

Tell your solicitor. I can imagine the estate agent will want to be involved, too.

There is no nice way to do it, which is what you seem to want to hear. Just do it through your solicitor. The vendors won’t care if you are reducing your price because of a dip in the market, you’ve lost your job or whatever reason. They will just consider the reduced offer and either accept or reject and go back on the market.

Thanks to those giving sensible advice. I'm not expecting to be told it is a nice thing to do, only what the practical approach is. I'm doing it because the economic environment has changed and the numbers no longer stack up. They have every right to say no.

Our buyers did it many moons ago on the morning of exchange. THAT was shit. That is also selling houses. You are free to do it. You feel justified. Instruct your solicitor.

personally a sale at this point is on a knife edge anyway.

like others have pointed out op there are potential problems but I would still do it, don’t overpay for a property like a flat. Bit different if it’s a one off larger property with potential to add value etc.

We spoke to the real estate agent who told the vendors.

It happens all the time. Don't feel bad! Do what's right for you and don't worry about offending someone you don't know.

Fwiw when we sold our buyers did it to us and it was up to us to either accept their final offer or not.

personally a sale at this point is on a knife edge anyway.

@dontcallmethatyoucunt what do you mean?

However those cards aren't any use if whoever they're buying from plays a different game, i.e., tells them to bog off and puts the property back on the market

But if the op really feels the market has dropped then she should be able to buy a similar property at a much less price than she’s paying on this flat. That’s essentially her theory.

You will probably lose your mortgage offer
and be paying more
my sons solicitors majorly fucked up and it resulted in my son having to reapply even though previously the bank would extend the offfer
it’s cost my son a rate that’s 2 percent higher and around 8k more over a five year period
so if you have a good rate work out what a new mortgage will cost you

I agree. They are well within the rights to do this. I am not pushing for the lowest possible price - I think that is likely to be another 10% what I am reducing to. I am looking to make sure that I am not overpaying in a market that has changed substantially and with a deep recession coming up.

Everyone has given you sensible advice. Losing your mortgage offer (when the chain falls over) may well cost you more than you think you’re going to save.

Well, that's sorted it. Thanks!

You have to do what's right for you. I've been gazumped a few times & people are far more accepting of that than gazundering strangely enough.

Are you sure you should be buying it all though?

Because everyone is feeling the same. Only people that think they got a good deal a few months ago are willing to go ahead.
Only people whose finances are secure will proceed.
First time buyers are VERY jumpy at the best of times.

I think you are likely to lose your buyers too though (nothing to stop another sale, but pricing could get more pressured).

who knows, the housing market is VERY hard to read. Your friend is guessing at best. It’s a fairly solid guess given the economy, but governments often interfere in the housing market and prices don’t do as expected.

If the chain fell over I would stay where I am out of necessity.

It's a good question, and I have to ask myself that as well. I need to sit down this weekend and do the new maths. But I hope the middle ground of reduced price would make it still viable.