Creating a chain halfway through buying a house!

[LukeJohn98]

Hi there team!

We are an engaged couple (both 33yrs old) planning to buy a house together; one of us is a First Time Buyer and one of us has owned a flat as his main residence for 7yrs. We are selling the flat, had one offer on 13th June which fell through on 21st Sept due to the low lease (which is now being extended).

We got a mortgage illustration on 25th August 2022 (3.6%), just before the interest rates went crazy.

We put in an offer on a house which was accepted on 8th August, 2022. We notified the Seller that we were chain free, as we planned to buy the flat irrespective of selling the flat first (which was naïve!).

We have now had the mortgage deal accepted and have until 31st March 2023 to complete the purchase of our house.

The seller was also keen to sell as fast as possible as she had already had a sale fall through. She moved out into rented accommodation in October 2022 (against the advice of the estate agent) and has since been chasing us to exchange.

We have told the seller that we were just waiting on the survey, which arrived on 17th Nov 2022.

A new offer was accepted on the flat (from another FTB) on 18th Nov 2022, and solicitors have been instructed. Given how close we were to completing the previous sale, our solicitors have all of our documents on file and are ready to go.

QUESTIONS:

• Can we afford to wait until the new sale of the flat is completed (basically creating a chain)?
• What is the likelihood that we would lose the house purchase and more importantly our mortgage deal?

The advantage of creating a chain would be saving £5,376 in capital gains tax, which seems unavoidable if we purchase the house whilst the flat is still in our possession. We would also not have to pay the higher rate of stamp duty (£5,000 rather than £15,500), although we are aware that we would be able to claim most of this back when the flat sells.

We would appreciate any advice on this situation from people with experience!

TL;DR how much risk is our house purchase at if we create a chain when the seller is ready to complete?

Honestly - id be absolutely livid! Someone in my chain tried to tie in another purchase at the last minute. The entire thing would have collapsed if they had gone ahead.

You cannot change the agreed deal at this stage. That's incredibly unfair of you. None of the facts have changed - you hadn't done the numbers - that's on you.

I'd not be happy about this. In my experience, buying and selling flats always seems to take an age because of the leaseholder. They always seem to throw in a spanner or just take ages to do what they need to do.

I wouldnt attempt this. I think you're risking your purchase and also your low interest rate. I think it's unlikely your leasehold flat would complete by end of March.

8th august offer accepted and survey done on 17th November? Not sure if ive got that right? To be honest if my buyer had taken that long to get a survey I would have put it back on the market.

When i offered on a house the survey was done 4 days later.

I completely understand why you’d want to. How about offering her £1k a month to cover her rent for every month until your sale goes through? (add it to the end price?) or make her a slightly higher offer to compensate - you’ll still be winning..

Our vendor was chain free and is now in a chain. I'm absolutely furious as her vendor is waiting on a new build and our buyer is really anxious as their offer expires end of Feb. Vendor wanted to compete by Xmas and is now saying February. I'm tempted to walk away at this stage from our purchase if we can't get a completion date confirmed and exchange before Xmas.
Your vendor was perhaps silly to move into rented but she has been waiting months and now you are possibly asking her to wait months again. Your solicitor might have all the paperwork but your buyer will need a survey, searches, to satisfy their lenders mortgage agreement and you can rule out anything happening from 23 Dec to 3rd January. It took us 6 weeks to get a structural engineer survey booked after an issue in our RICS survey and that was without leasehold issues.

You can't expect her to wait even longer just for your benefit

Why do you think you would have Capital gains tax to pay?
My understanding is so long as you sell the property 9 months after you own 2 properties you would have no tax to pay.

www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2021

If you complete on the new place first it will give you chance to decorate before you move in.

My buyer tried to do this to me - the estate agent was instructed to put the house back on the market. We did complete, their sale took a further 8 weeks.

I would consider it the height of dishonesty to post as chain free and then move the goalposts.

like PP said, you can claim the CGT back.

Re the tax:

• on the additional property tax I believe you can also get a refund if you sell within a certain period after the new property - I think so anyway but you will need to check
• on CGT my understanding is that if you own a property for 10 years and lived it in it as your main residence for 9 of those then you only pay 9/10 of the CGT. That certainly used to be the case but you’ll have to check.

Good advice on checking - especially as you are wrong on the CGT. A poster above has it right re the 9 month rule.

I wouldn’t try and create a chain. Your mortgage offer has less than 4 months remaining on it and flat sales are normally slow, especially if you’re currently waiting for the lease extension to be confirmed. Our house purchase has been delayed by issues higher up the chain and we can’t extend our mortgage as we’re on the old interest rate (2.3%) The cost if we don’t complete in time and need a new product is eye watering - if you had to take a new mortgage at the current interest rates would the extra interest be more than your £5k capital gains tax?

It also seems very unfair on your vendor who’s already had their fingers burnt once.You knew they wanted a quick sale and you agreed to that and told them you’re chain free. They’ve already invested 4 months of time in this sale so it could hugely damage their trust in you if you move the goal posts now, in their shoes I’d remarket rather than form a chain because I wouldn’t have feel confident you would deliver on anything you said going forwards.

Who cares whether your vendor is livid, it's a buyers market and prices are dropping.

Go ahead and create a chain if you want. Better still create a chain and ask for some money off too since the price has dropped from August. You hold all the cards here, don't kid yourself otherwise.

If they want a quick sale without a chain they can offer 5-10% off. Circumstances have changed since August including the OP's and he's not a charity.

Was that during a housing crash?

The market has changed significantly since August, the OP is not responsible for it. It's not dishonest given that circumstances have changed wildly in the last few months.

The seller can go to hell if they don't accept. There are other people desperate to sell all over the place.

Also OP I would not move without a chain right now it's way too risky. You're already paying August price for this house when your flat has achieved November price. The buyer for your flat could pull out and you could be left with a second property going down in value.

You can offer under ask on properties now, the situation is nothing like August. Unless this is your dream home don't put yourself in a difficult situation.

Or just flush your money down a toilet

The UK system is so broken.

People have no decency and the system encourages fhis. This would not be allowed in most countries and shouldn't be anywhere. If you make an offer you should do so taking into account all market risks at the time and stick to it.

The market has changed but it’s not a universal crash across it all so it’s pretty naive to think every seller will take 5-10% off.

It depends on the house and area, we’re still keeping an eye out due to our delay and the very average houses are reducing in price slightly but the best ones still shift quickly. We offered on a very nice house last week (rare to the market here atm) and it went to best and final 2 days after viewings and went for 10% over asking.

Same thing has happened in every previous universal crash. Better ones hold up for a bit but eventually everything goes down. Buyer beware.

Don’t do it. Don’t be a prick. People like hotchoxs might have no conscience but prices and circumstances were agreed as things were at the time. If the market was rising, would people be happy for the seller to remarket for more?

It was on you to check the cost of not offloading the flat and you failed to do that. Just because you might hold all the cards doesn’t mean you should exploit that and exploit others.

Everyone wants their house to go up 10% a year without thinking about the consequences which has led us to this mess in the first place.

Anyone with a conscience would not pay August price for a house.