Pulling out near exchange- market changed

[Vanillajade]

I’m buying a 2 bed flat in east London for £360,000. It’s a Victorian conversion with 86 years left on the lease, the kitchen is not usable so needs a full refit, bathroom is dated but fine for now.

I offered nearly 7 months ago. At this time this price was really good even considering the lease and kitchen refit but since then the market has dipped, and similar spec flats nearby are sitting unsold for months for not much more than I’m paying. The seller already offered an extra 5k off as the process has dragged as they were initially purchasing but now are chain free, but the other places don’t need lease extensions.

My solicitor’s report flagged the flat is within 50m of contaminated land and near a Pumping Station which is still in use. I’d never have known this without the searches.

The seller bought in 2016 for £215,000 so they’ll still make a good profit. I like the flat and the transport is great but I’m worried about resale in 4–5 years- not even for profit but just being able to get back what I’ve spent.

I’ve spent a decent amount on searches and solicitor fees and we should be talking about exchange soon but I’m really reconsidering whether this is the right thing to do anymore.

I feel the lease is too short and you may have problems if you wish to sell in 4 to 5 years.

what else have you seen and why do you think the same will not happen again on such alternatives?

what is driving your move: bigger place? new job? "better" area? In other words how urgent is your move

In a growing market though the price might well be higher between offer and completion, but the vast majority of sellers are not them demanding the uplift.
So it goes both ways. If you feel you could buy a better flat fur the same price pull out, but that gist may also lose value. Or not. If you plan on living there at least five years I wouldn’t worry about it. Hope you have an idea how much the lease extension will be and if it’s possible - I wouldn’t buy a place on such a short one.

You can extend the lease for a healthy sum, once you've owned the property for 2 years. As you run down the lease, the property will lose value. I think below 80 years it really falls, so you will no doubt have to discount the property or extend the lease.
It's dragged on a long time, I wouldn't normally advocate walking away, but nothing about your post sounds excited for this property. And it should.

Ask them to knock more off the price if they don’t walk away.

I don’t think you’d be wrong to reconsider but it’s a bit unfair to wait 7 months. When did you get the searches back?
The lease and condition of the flat hasn’t changed from the day you offered.

Obviously don’t go through with it because you feel guilty but you need to own the fact that you’ve changed your mind at a late stage which will piss the seller off.

Why exactly are you changing your mind, seven months in? You think you could do better for your money? Are you sure you can?

That lease is problematic. I would walk away now - as you say, plenty of choice at your price point. I’m looking to buy now and there’s a huge number of flats that have been on the market for months, some even for years. My guess is that the seller will want to reduce again and that they haven’t had much interest. I think there’s been more and more publicity this past year or so about the dreaded service charges and the pitfalls of having a leasehold flat.

The lease is a huge problem and is going to cost a lot to extend.

I would need to be very very sure of this property with a lease this low.

I think if the seller paid £215k in 2016, your price of £360k with a shorter lease is too much. A far as I can see, flat prices in London haven't really increased much since Covid, and I don't feel the value could have gone up by 145k in that time. But I have't looked at other similar properties, so I could be wrong.
What are comparable properties actually selling for?
If you need ( as opposed to would like) a new kitchen, if it actually is unusable, then that is going to cost at least 10k and could be much more, AND it may be an issue with your lender. What does your valuation say?
You could call the surveyor and ask if their valuation still stands, given the issues with the search. Ask them about impact of the the problems revealed inn the search too.
Has the seller been in contact with freeholder regarding a lease extension? It's a while since I practiced law, but I think that you can extend a lease of more than 80 years for no premium, you just have to pay costs. It's fine if the freeholder is prepared to play ball, but if they are difficult, or absent, then you have more of a problem. Why hasn't the seller extended the lease? Could they be persuaded to do so? I think ( again rusty) that the lessee only gets the right to extend after 2 years, so it makes sense for the seller to do it, and pass on an extended lease to you.
Your mortgage offer has probably expired, so you will likely have to to reapply and get an updated survey ( which I imagine will cost you). The search will also be out of date, though you can get insurance for that. What I'm saying is that it may cost you more money to go ahead anyway.

I think your sensible to consider pulling the plug - and that you are right that the market and prices have softened a lot in the last 7 months. I think they have a lot further to soften personally.
Putting that aside the biggest issue you have with selling in 4 or 5 years will be the lease. Its too short. Many lenders don't want to give mortgages on short leases of less than 85 years. You need to factor in the costs extending it asap if you do buy. If your really keen on the property perhaps renegotiate the agreed price to cover a lease extension. If you don't then yes there is a good chance of loosing money when you want to move on.
Add to that the reality that the required kitchen refit probably won't add on what you spend having it done

How much will the lease be to extend? It’s too short.

Thanks for the comments so far- to answer a few questions.

I offered in late March so the prices were still higher because of the stamp duty holiday. They’ve decreased pretty steadily over the last 7 months. The price I agreed upon was taking into account the lease extension, and what neighbouring properties were going under offer for around Jan-March, (400k mark) prices stayed consistent until around May by which point they’ve dropped pretty significantly. One nearby that went under offer back in Feb is back on the market significantly cheaper and doesn’t have the same issues with kitchen lease (from what I can see)

I didn’t purposely wait until 7 months in, they were initially chain free then decided they wanted to buy so I put a pause on everything, that purchase fell through, they had another purchase which also fell through.

In the last 7 months I’ve also managed to save a fair bit more so can afford more than I could back in March.

re lease extension, no longer need to wait for 2 years can extend straight away and expect it to be around £15k all in.

I doubt they will budge any further on price as they were reluctant to reduce by £5k I had my survey back in late April and being honest the amount I would want it reduced by to proceed would be much more than they would ever say yes to.

The other thing is I would need to leave my current living situation by end of the month, I have been able to save pretty aggressively up until now but finding a new place will be quite expensive plus I’ll then be locked in for at least another 12 months.

Oh and my solicitor only sent my searches last week as part of his solicitors report, I haven’t been sitting on this for months

Is it 50 metres or 50 miles from contaminated land. If it's 50 metres, I 'd be very unkeen. No price on health really as far as I'm concerned. The sellers have got to realise that things change in the market if you drag things out for 7 months.

I too definitely think that the market has deteriorated in 7 months. The sellers can think what they like, but the market is the market whatever they like to think.

What kind of contaminated land? Former petrol station? Is it something more significant that should have been disclosed in the seller information forms? Given they’ve owned for such a short time, they’re likely to be aware. It’s a good reason to walk without feeling any guilt

So in March the prices were £400k and you had an offer of £360k accepted to account for the lease, kitchen etc

7 months down the line and eventually it’s going ahead but your conveyancer has only just sent you the searches.

Your sale it seems has had a lot of delays

If you need to move to avoid being stuck for the next 12months and you have saved more money then really
whats more important

• moving now or
• waiting another year

Remember if you wait whose to say you offer on a flat next year , it goes up in price whilst conveyancing proceeds and the seller decides to dump you to get more money as property prices have risen. Works both ways

The prices were between 390-400, by April/ May they were around 390 but on the market for a while, by June I’ve seen ones listed for 370-380 and sitting including one that went under offer originally for 400 but the purchase must have fallen through.

Yeah if I wasn’t going to be stuck for another 12 months in a rental I think my choice would be easier

You are having understandable doubts about this house purchase. I don’t understand why the vendors did not increase the lease, I think they should have done. Also you have now saved more money and can afford a better property. You need to do what’s right for you.

The seller bought in 2016 for £215,000 so they’ll still make a good profit.

@DelphiniumBlue is right. You’re massively overpaying. From what you’ve written re contaminated land and an operational pumping station, I assume you’re buying around the Manor Road area. A quick Google reveals other 2 bed conversion flats that were last sold in 2016 and have been on the market for months and have had to reduce the price to only £15k more than they paid in 2016. And that’s without the short lease. Your sellers expecting to make almost 50% on top of their 2016 are having a laugh.

I would pull out. The lease is too short, too much work to do and the contaminated land would be an absolute no for me. Good luck.

It’s a difficult one. However you are searching the market to see if properties have gone down and whether the price you offered is now in line with ones on sale
They won’t be because the market changes all the time and to focus only on prices now means you’ll never be satisfied with the price unless the market is rising in which case you’ll see yourself getting a bargain.
Will sellers think the same …. ?

If you focus too much on this modus operandi you may well end up renting for a long time.

I’d Grab it or dump it but I’d stand by an offer made unless something drastic comes up in the searches

@Vanillajade Must you sign a new agreement with your landlord or can’t you just go onto a rolling contract?

Where in East London is it?

its difficult to say if its too much or too little.

we looked at a beautiful garden ground floor two bedroom with own parking and garage for £420,000 - 82 year lease. £20,000 lease extension, went for full price in 48hrs. It is beautiful.

if you don’t want to move in - don’t, but it must be rather draining after seven months, and you’re thinking this is never going to end. Tell your estate to hurry things along, cos you’re starting to get cold feet.and looking at other property, and there is one you like!

Good lz