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.

Of course you can do it. You will have wasted huge amounts of time and money for both your buyers and the vendors as a result of your failure to adequately plan your finances though.

But you know that already.

As the seller, I personally would pull out of the sale - I wouldn't entertain negotiating this late in the timeline.
As the buyer for your flat, once I'd been informed you'd tried doing this (by either the chain breaking down or at the very least, slowing down whilst things are sorted), then I would also drop my offer on the flat you are selling. No way as a buyer would I proceed once I knew someone higher up was trying to renegotiate. I would also consider pulling out because I wouldn't trust you not to do the same again, thus putting the chain in jeopardy again.
It's entire up to you. A place to live and buy is only worth what you're prepared to pay.
By all means try it but be well prepared for the full chain to back out.

Why would you ask mumsnet about the legal implications rather than, say, your solicitor?

We have just been gazundererd by our buyer. Slightly different situation as we moving into a much longed for forever home. Had this not been the case and I was a landlord, like your vendor, there is no way I'd have accepted a reduction so close to exchange.

It doesn't sound like you're bothered what people think anyway but what it's worth the hatred I feel for this man is beyond anything I've felt for another human before. You might get some surprises when you move in if you pull it off.

Ordinarily I think it's morally wrong to go back on an agreement, especially if nothing has changed in the market, but I think there are certain circumstances in which it's probably advisable - if the property value really has slumped, why should you take the hit when it's happened during someone else's ownership?

Really important is to check your mortgage terms won't be negatively impacted by a change - I think mortgage lenders are looking for any excuse to ramp the price of mortgages up.
Also really important is to be able to live with the consequences if the seller pulls out.
Finally, don't expect them to leave the house in a good condition - they probably won't clean it or do any of the nice little tidying jobs life filling in picture hook holes.

If I were your seller I wouldn't be thrilled (no one would but it happens) ...... but I'd be frustrated that you've waited this long when the Truss effect was clear
several weeks ago. The delay would be what would annoy me as a seller.

Used to work in conveyancing and it’s fine OP. It happens all the time. If you’ve not exchanged you are not tied into any legally binding contract and can negotiate or walk away at any time without repercussions (with the exception of losing the money already spent on searches, solicitor fees etc).

It sounds to me like you are having second thoughts altogether but if you genuinely do want to proceed I would advise moving quickly so the rest of the chain aren’t delayed too much. I’d just write one email explaining that due to the economic uncertainty and the current downturn in the property market you would like to reduce your offer to X as you feel it is no longer worth X as previously agreed. Send it to your solicitor and copy in the estate agents and wait to see what they say.

As PP’s have said you’ll have to get a revised mortgage offer but that’s not usually a big deal and might take a couple of weeks to come through but apart from that don’t worry about it and just do what’s right for you.

What does your mate in finance do, that he knows better than the Bank of England, five plus years my arse

The BOE who thought inflation was a blip?

I think it's an entirely sensible thought process, and a sensible thing to consider. Yes, it's going to annoy the vendors, and you run the risk of everything collapsing - but if you're willing to run the risk I'd do it.

I think you need to do what’s right for you. You shouldn’t be making a massive financial commitment for the sake of others. It’s unfortunately how the house selling and buying process works in England. I speak as someone who has been waiting for her buyers to exchange for weeks while they fret about a leak in the roof, and fully expects them to walk away. It will be awful, but I’m not a charity.

I’d check whether your mortgage company will let you change the asking price without withdrawing your mortgage offer. I know our buyers couldn’t, as we have agreed a reserve for some work that the survey identified, rather than dropping the purchase price.

Price negotiations are normally done through Estate Agents not Solicitors.

To go ahead at agreed price when it is obvious value has fallen and from all current predictions will continue to fall, does not seem sensible to me. So I'm with you OP.
You weren't to know how much things would change when you made the offer. I don't think some people appreciate how much the property market has changed in a short period of time. I expect the same thing is happening on lots of chains.

I keep reading that property prices will reduce, and think it’s likely, but I haven’t seen much evidence of it in terms of asking prices yet.

I understand your concern though if you feel that you offered an inflated price, and at the end of the day anything is only worth what someone is willing to pay.

It should be quite straightforward to communicate via the estate agent or your solicitor that you wish to reduce your offer. Unless the vendors live in an information black hole it’s unlikely to be a surprise.

I am a landlord and if a sale fell through right now, and I didn’t need to release capital immediately I would just re let the property. The rental market is still very busy, and historically will remain so whilst property prices are falling, as people rent whilst waiting for the market to stabilise.

I've recently moved, in a market of falling prices. Everyone in our chain fortunately came to the same conclusion, that it would be much more expensive to pull out and re-arrange a mortgage at the higher rates, as well as pay all the costs again, than to proceed with the sale knowing that house prices are falling. Yes, we've all paid a bit higher than we could probably have got it 6 months later. But we've also all sold for higher (apart from the ftb) and got an 'old' mortgage.

If you're planning on not buying an alternative if your vendors say no, then I guess it doesn't matter, as long as you're happy to stay where you are for the 5+ years your friend reckons it will take for prices to right themselves.

I keep reading that property prices will reduce, and think it’s likely, but I haven’t seen much evidence of it in terms of asking prices yet.

They have definitely reduced where I am, not insignificant snouts either. This is SW London

They are falling around me, and reductions all over the shop.

We just offered asking price on something that has been on for months and almost certainly isn’t ‘worth’ that, but we loved it and we plan to live in it for a long time. I wouldn’t do that on a flat.

It sounds as if you cannot really afford to move. Sensible thing would be to pull out.

Do it don't get put off by the people on here trying to guilt trip you. It is a business decision worth hundreds of thousands of pounds. The housing market according to Rightmove dropped on average 4k last month. You do the decision that is right for you. A sensible seller isn't going to want to chase the market down.

It sounds as if you cannot really afford to move. Sensible thing would be to pull out

No the sensible thing is to reduce her offer & then walk away/buyers walk away if it doesn't work out.

Do it don't get put off by the people on here trying to guilt trip you.

I find this interesting, why are people doing that to the OP? I own a home but it's obvious the market has completely changed.

It's a business transaction, so you can do what you like.

As mentioned, you'd need to get a new mortgage. You can just alter the one you have. So even if they do accept the new price it might cost you more after new interest rates are applied.

Also, are you planning on selling it on soon? Cus if you aren't, and the price stagnates it's even reduces in the short term, it will still go up in the long term. So if you aren't planning on flipping it whatever, I wouldn't worry about short term price blips.

With the country in recession, inflation at 10%, another interest rate coming, tax increases kicking in, why put yourself out on a limb by using all your savings, plus moving costs etc, to buy a property that by now is 20% more expensive than anyone else would pay for it?
If you can sell and rent, maybe it’s an option, do a spreadsheet, however it may just be better to pull out completely and sit tight for a couple of years, at least you won’t be under financial distress and hopefully negative equity.

I’ve not RTFT but it’s not true that you will lose your mortgage offer. You would need to reapply for your mortgage but it’s likely the offer you had lasted six months (check! It used to be 12 and probably depends on the lender), and that if your lender is happy to lend on the new price then it would be for the same rate that you already have.

As others say, the vendors may pull out on principle so you have to be sure that you are comfortable with this risk and would not regret attempting the reduction. Do you want the place enough to pay so much over the market for or are you willing to lose it?

However I do think the circumstances and your reasons for gazundering are more understandable/reasonable - you’re not doing it to try to screw them over but because the market and the outlook have changed drastically since you made your original offer, and you were already paying over the asking price.

But balanced against that is the fact that the vendors apparently don’t need to sell.

Another option would be to split the difference and ask the vendor to accept a 5% reduction, explaining the reasons why you think 10%would have been justified but that you want to do the right thing.

Gazundering is really bad form and I’ve known buyers to be blacklisted from local estate agents because of it. If you go ahead and the vendors say no, you said you’ll have to pull it anyway. If you have comparables to prove the property prices have reduced then I’d go to see your estate agent and have an honest conversation with them saying you’re not comfortable purchasing the property when the prices have dramatically reduced and you’re considering pulling out. Let them advise you, let them be the ones to suggest a lower offer (if they think it’s the right thing to do) or they will advise the vendor to re-market the property. Also, definitely check your mortgage offer

People are short sighted I too own my home outright and would welcome house price falls so money can be spent in the real economy and not end up in wealthy land owners pockets. Current prices were only sustainable at unsustainable interest rates and unsustainable economic policy e.g. QE. The market has flipped it was always going to.