Option to purchase

This forum is for Garden Law problems that don't fit into the other categories. Please treat it with respect.

Moderator: Angelisle

Post Reply
jonahinoz
Posts: 1547
Joined: Fri Aug 05, 2011 5:15 pm

Option to purchase

Post by jonahinoz » Sat Mar 17, 2018 3:47 pm

Hi,

This is to ask how an Option to Purchase works, and if anyone can offer any advice.

A fortnight ago (Monday), our offer to buy a bungalow was accepted. On the Friday, the seller accepted an offer from a cash buyer. So we made an offer on anther bungalow, £20,000 below the asking price. It was accepted. And now it gets complicated.

The seller is an old lady, who has agreed a part-exchange with a builder, who is building sheltered housing ... I presume he is building several. He apparently has the casting vote ... or so we are told. Yesterday the estate Agent phoned to say that the old lady had been told that her new home may not be completed until July, not the end of April, and did we want to continue with the purchase? We are in two minds. The sale of our present house is moving along ... full survey on Wednesday, and so far there have been no howls of anguish. We do not wish to discourage our buyer, but there is a chance that we may be homeless for one to two months.

Being uncertain who was actually selling the bungalow, I "done a Google". Google replied that there was no sales history, which to me indicates that the part-exchange deal has not been completed, and the old lady is still the owner. It does not help that she is both deaf and blind, though we do not know how badly.

We do not want to lose this bungalow, it ticks most of our boxes. But we do not want to leave our offer on the table, endure several weeks of being homeless, only to have the builder complete his project, and then decide to start negotiating the price. In the meantime, we will just be acting as his "bottom line".

I am thinking of drawing up an "Option to Purchase" at our current offer, though there is likely to be a premium to be paid. Then proceed to Exchange of Contracts, but delay Completion until the old lady is able to move into her new home.

How can we ensure this agreement does not become open ended? I assume the builder wants to collect some cash ASAP. What happens if the old lady dies? What happens if the builder ceases trading for financial reasons ... will his contracts die, or be suspended?

We were looking for bungalows within one mile of our daughter (she does not drive), The supply of those has dried up, so our latest choice is thrree miles. If we lose that, the next suitable bungalow is about five miles, after which it gets difficult. Looking in a higher price bracket does not help.

What would you do?

John W

John

jdfi
Posts: 547
Joined: Wed Jun 06, 2012 10:39 pm
Number of Posts per Page: 20
Number of topics per page: 50

Re: Option to purchase

Post by jdfi » Sun Mar 18, 2018 2:58 pm

The obvious starting point is to spend £3 to download the title register - it will either be:

-her with a deed to builder noted
-her
-builder
-unregistered

Its hard to think what sort of document you could do that doesn't allow either party to take the proverbial.

Obviously you don't want a document giving her as long as she wants to stay in it. Neither do you want to transder it to him and allow him to spend as long as he needs building this sheltered housing.

I really don't know what to suggest, though the idea of you buying it now, renting it back to her (at a reasonable rate, to motivate her to vacate) as well as you renting another residence for your own purposes, seems to have its appeals.

I would also point out that by doing an arrangement like this, the builder is a lot more secure than if he just took her place as a part exchange and had to sell it. That would arguably drive the price down a bit, not up.

Collaborate
Posts: 1794
Joined: Mon Feb 23, 2015 9:17 am
Number of Posts per Page: 20
Number of topics per page: 20

Re: Option to purchase

Post by Collaborate » Sun Mar 18, 2018 3:42 pm

It takes over 3 months for a dealing with property to appear on the free websites. Further, it may take some weeks before a transfer is registered at the land registry.

mr sheen
Posts: 2450
Joined: Fri Feb 27, 2009 2:33 pm

Re: Option to purchase

Post by mr sheen » Sun Mar 18, 2018 5:29 pm

Many people exchange contracts and then rent for a number of weeks/months on properties they really want.
Choices:
Look for something else
Proceed and EXchange contracts so that the purchase is secured
Sell first and then rent so that you can proceed quickly when the right property comes up

The current house purchase system does not provide for contracts outside the system and if you seek to pursue a commitmt from a disabled person for a price below market value....the family and the courts will be unsympathetic.

jonahinoz
Posts: 1547
Joined: Fri Aug 05, 2011 5:15 pm

Re: Option to purchase

Post by jonahinoz » Mon Mar 19, 2018 5:09 pm

Hi Mr Sheen,

Funny things have been happening on this forum ... tis morning I was locked out as being unrecognisable.

We are scanning Rightmove several times a day, but there are now virtually no suitable bungalows available with a reasonable distance of our daughter's house.

We have started to look at houses that could be converted to fit our needs ... room to install a lift (£15,000?), downstairs WC (we've both reached that age), walk in shower (£7,000 to change bath to shower?). Our lender is unlikely to take those into account when working out what to lend us. We will be putting £200,000 of our own money into the pot. Our daughter does not drive, and is already spending £100 a week on taxis. A lot of things to take into account ... different people have different needs.

We heard from the sellers estate agent today. The builder had contacted him, asking for feed-back on our viewing last week. EA had to remind the builder that he had accepted our offer. Whatever, it seems somebody else is viewing the bungalow tomorrow, so it may well be taken out of our hands. My wife refuses to enter into a bidding war.

The EA confirmed that the old lady is still the owner of the bungalow. It makes it difficult to negotiate when one person makes the decisions, and somebody else pulls the strings.

John W

jonahinoz
Posts: 1547
Joined: Fri Aug 05, 2011 5:15 pm

Re: Option to purchase

Post by jonahinoz » Mon Mar 19, 2018 7:04 pm

Hi,

Since posting my last mail, the selling estate agent phoned, spoke to my wife, asked had we thought about things. She explained our dilema. EA went away, came back soon after, said that if we were prepared to meet their time scale, they wanted us to have the bungalow at the agreed price.

So maybe there are honourable people out there?

I wonder what the old lady would like as a house-warming present?

John W

jdfi
Posts: 547
Joined: Wed Jun 06, 2012 10:39 pm
Number of Posts per Page: 20
Number of topics per page: 50

Re: Option to purchase

Post by jdfi » Thu Apr 05, 2018 9:48 pm

jonahinoz wrote:Hi,

Since posting my last mail, the selling estate agent phoned, spoke to my wife, asked had we thought about things. She explained our dilema. EA went away, came back soon after, said that if we were prepared to meet their time scale, they wanted us to have the bungalow at the agreed price.

So maybe there are honourable people out there?

I wonder what the old lady would like as a house-warming present?

John W
Best of luck. But what does "meet their timescale" actually mean? Is this you being patient and possibly renting/hotel for a few months while her new place is ready?

SJC14
Posts: 68
Joined: Wed Nov 01, 2017 2:23 pm

Re: Option to purchase

Post by SJC14 » Fri Apr 06, 2018 2:31 pm

Collaborate wrote:It takes over 3 months for a dealing with property to appear on the free websites. Further, it may take some weeks before a transfer is registered at the land registry.
Agree with this. In the 3 part exchanges that I have done none have appeared in the land registry, always just the final sale that the builder has done with a new purchaser. Am not sure of the legalities but I assume the house is just held as collateral against the builders house and only really sold and registered with the likes of the Land Registry when it is sold.

July is only a few months away, so entirely acceptable to the purchaser of your existing house to wait for entry till then. To close the loop I would ask your lawyer/solicitor to agree on an entry date or they pay X in accommodation and storage fees.

jonahinoz
Posts: 1547
Joined: Fri Aug 05, 2011 5:15 pm

Re: Option to purchase

Post by jonahinoz » Sat Apr 07, 2018 7:38 pm

Hi,

Things progress. We now understand that the person we thought was the builder, is actually somebody who "underwrites" (?) the sale of one house to finance the purchase of new houses, by means that I don't fully understand, but part exchange has been mentioned.

I understand that the old lady is still the paper owner, but the "underwriter" seems to be in charge. They demanded to see evidence (bank statements) of our ability to pay. Then they wrote us a "heavy" letter, stating their terms. The estate agent says this is normal, as they had been let down too often by buyers, in years gone by. He says that Estate Agents would blacklist such businesses if they pulled out without good cause. Our two solicitors do not seem bothered.

Our house was subjected to a full survey, with nothing serious being found. I understand the buyer signed contracts on Thursday. The bungalow we are buying was valued on Wednesday, and met valuation.

We only realised, early this week, that if the two contracts are not simultaneously exchanged, then we will have to find a 10% deposit for the bungalow. Oops! Maybe it is best if we do sell before we buy ... provided there isn't too long between.

John W

despair
Posts: 16381
Joined: Mon Mar 14, 2005 7:07 am

Re: Option to purchase

Post by despair » Sat Apr 07, 2018 10:24 pm

Yes you have to provide 10% deposit but so does your buyer and any good solicitor arranges for the 10% from your buyer to be used for your new purchase

jonahinoz
Posts: 1547
Joined: Fri Aug 05, 2011 5:15 pm

Re: Option to purchase

Post by jonahinoz » Sun Apr 08, 2018 8:52 pm

Yes you have to provide 10% deposit but so does your buyer and any good solicitor arranges for the 10% from your buyer to be used for your new purchase

Hi Despair,

True ... I think one of my solicitors had a special fund for this, but we never needed it.

We are selling for £178,000 (no mortgage to redeem), and buying at £270,000 (using Equity Release on the bungalow, as a mortgage) (That is not a good idea for everybody).

I our sale is completed first, not a problem, all we need will either be in the bank, or available at short notice. But we will have to find and pay for somewhere to rent, and pay for furniture storage. Several hundreds of pounds every month, wasted.

But if we have to exchange before we complete the sale, we will have to find £27,000. If exchanges are synchronised, then we will need to find £27,000 less £17,800 = £9,200. There are lots of other variations on that theme.

Equity Release? My wife says we can afford to cover the accruing interest, with "hands in pockets, whistling", although we don't actually have to pay anything. One would assume that a £300,000 house will appreciate more than a £200,000 house, so daughters inheritance should be safe.

John W

despair
Posts: 16381
Joined: Mon Mar 14, 2005 7:07 am

Re: Option to purchase

Post by despair » Mon Apr 09, 2018 8:25 am

Not sure I agree with your premise that equity releaase etc will work or safeguard your daughter

I am very tired of seeing so many properties especially bungalows advertised as reduced for over 65s with lifetime this or that

need to find out so much more about it because its blocking me finding aa bungalow right now

jonahinoz
Posts: 1547
Joined: Fri Aug 05, 2011 5:15 pm

Re: Option to purchase

Post by jonahinoz » Tue Apr 10, 2018 9:58 am

I am very tired of seeing so many properties especially bungalows advertised as reduced for over 65s with lifetime this or that

Hi Despair,

I haven't seen bungalows reduced for over-65s, but have seen them restricted to buyers over 50 (probably with other restrictions such os "no dogs", and "allocated parking for one car", etc) I get the feeling that you are expected to close your front door and behave yourself.

With Equity Release, the older you are, the more you can borrow, which is understandable when you learn how it works. I'm 79, she is 76.

You have to pay a couple of thousand up front IF you proceed with their offer. Do nothing, pay nothing.

Our offer is for 50% of valuation ... first valuation is free ... at 4.1%. The interest rate can vary, but is written in stone once you accept their offer. It will not increase at any time thereafter (better than most mortgage plans). We have three choices.

1. We need not make any repayments, let the interest roll-up, until the amount owing is equal to the value of our house. Remember the house ought be going up in value too. The amount owing will never exceed the value of the house, so we may not leave anything to our daughter, but neither will we leave her a debt.

2. We can agree to make monthly repayments, which will prevent, or reduce, the interest rolling up.

3. We can make ad-hoc payments of up to 10% per year, which we have chosen to do. That will avoid any roll-up of interest, and actually reduce the debt by 4% per year ... and still the house should be appreciating. That is what I meant when I said our daughter's inheritance will be protected, or possibly improved ... not that she wants it.

There is also the matter of inflation boosting our monthly pensions, while the interest remains fixed. Once this is done and dusted, we will lay out the prayer mats, and beg for rampant inflation.

I was very impressed with the lender's agent insistence on looking after our interests.

Do not go for "NO REPAYMENTS" unless you can accept not leaving your house to anybody when you pop your clogs. I think your other asserts are safe.

John W

jdfi
Posts: 547
Joined: Wed Jun 06, 2012 10:39 pm
Number of Posts per Page: 20
Number of topics per page: 50

Re: Option to purchase

Post by jdfi » Sat Apr 14, 2018 11:59 am

Have you looked at applying for a 'standard' small mortgage with using your pensions as your proof of income. With such a large deposit and small mortgage I don't think you'd need to show much.

However, your situation as described doesn't seem outrageous really.

Post Reply