Buying a 2nd hand house with 'long' completion date - safeguards?

I am looking at buying a house, but the vendor is not ready to 'move' just yet.

Actually, they don't live there any more but they need to move their furniture and personal effects.

The reason this is problematic is that they live abroad, and for personal reasons they can't get over to move their stuff for a few months.

Fair enough.

EA is proposing that we go ahead with the deal, get contracts signed etc immediately but with a 'long' completion date i.e. that we complete and get the keys later in the year.

THis seems fair enough, and is prob standard enough as well.

Obviously we would have a full 10% deposit down once we sign the contract, so we are not going to be able to back out once that is signed without losing our deposit.

Just wondering what guarantees we as buyers will have (1. that the sale completes, and also 2. that the completion dates are met)?

And how would they be enforceable?

If we go ahead with this we really don't want the process to end up dragging out.

Maybe this is the same as any other purchase - there are no guarantees??!

the EA's advice is hardly surprising but he/she/it are hardly an independent source of advice are they?
given the market why tie yourself down to this deal which may or may not complete for a number of months while the vendor gets their act together to move their stuff out and the market may only decline further? if the vendor was that interested they'd fly home, move everything out into storage, it could take a weekend.
if i were you i'd pull out but keep an eye on the property, chances are it's not going to increase in price.
if it's the house of your dreams and there's nothing like it available then maybe sign up but that's unlikely.

Sounds like the vendors "want to have their cake and eat it too"

They're asking you to agree a price now for a house you won't get until some time in the future. You are taking all the risk in order to suit their plans.

Maybe you have this built in to the price agreed.

There's also no real incentive for them to get their stuff moved as you'll have signed a contract.

Thanks for your thoughts on this.

Without getting too far off topic:

I guess those responses are based on a belief that there is more downside risk to the value of the house than upside risk? Not trying to spark a debate on house prices, but a suggestion that the market may decline further is speculation. If one believes that, one might decide not to buy at all. How is this plan any different than someone buying now with a view to completing in 2 or 3 months time?

Also, I realise that the EA is trying to come up with something to secure the deal - well that is not a surprise as that is his job and it is how he makes money. I don't imagine any of us are acting in anything other than a self-interested way. I don't see any point in EA bashing, neither do I imagine they are a source of independent advice. Does anyone?

The idea of signing now and completing a couple of months later than 'the norm' is meant to be of mutual benefit:

buyer locks down on the sale of the house at a price they are comfortable with.
EA gets the sale and commission in due course.
I lock down on the sale of the house at a price I am comfortable with.

Back to my original question:
if I proceed with this idea, then after I sign contracts, have I got any leverage to ensure that the sale does indeed proceed to a successful conclusion, and in a timely manner as agreed?

Could you insist that they sign contracts first? Then you know at least that they are tied in to the deal before you sign.

If both you and the vendor sign and exchange contracts and you pay the deposit then you will have a legally binding contract. The closing date will be in the contract and you can ask your solicitor to ensure time is of the essence in that regard.

You can't insist they sign contracts first but you can make your signing contingent on their signing within an agreed period- say two weeks.

Thanks.

I didn't make myself clear - when I say that contracts are signed immediately, I meant by both sides within a very short timescale.

At that stage we have a legally binding doc, but is it enforceable in terms of the end result ie completion, and the date of completion ?

Am beginning to think the answer is - 'no more or less enforceable than any other sale'?

Is that right?

Good lord, it isn't that hard to clear a house. They can hire packers and movers and have the lot put into storage for whenever they're ready and able to return and sort it out.

Tell the EA that if they want to secure the offer price, you need to secure a possession date. Pick a date that works for both parties and have your solicitor put in a clause stating that they have to pay you €X per day for every day they fail to vacate the property after the agreed possession date. A suitably punitive amount, like €100 per day, should not be a problem if they actually are intending to vacate on the agreed date.

OK, that's the kind of thing I was wondering about.

Obviously I can't be too draconian about this, not trying to lose all goodwill and co-operation.

Would it be normal practice to put such a clause in the contract?

Anyone ever done it?

Anyone ever enforced it?

Would be interested to hear from an EA point of view - I wonder if MrMan or someone is reading this and could comment please?

My questions remain:

but is it enforceable in terms of the end result ie completion, and the date of completion ?

Am beginning to think the answer is - 'no more or less enforceable than any other sale'?

Is that right?

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Eamonn, What do you gain from this agreement? As far as I can see, it is all in favour of the seller.

It's a legal contract. I don't see why it isn't any less enforceable than monthly payments from a builder late on a house in a new estate, or daily fines for builders late on a new office building.

Agree the date with the seller via the EA and let your solicitor propose and duke out the details of the penalty clause with their solicitor. That's what your solicitor is for - there's this ridiculous notion that they are simply a necessary evil for glorified paper pushing, but their primary job is to protect your interests in the sale.

Blinder said:

Eamonn, What do you gain from this agreement? As far as I can see, it is all in favour of the seller.

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Yes I can see that the seller gets what they want, I have no problem with them getting what they need as long as its within my limits.

I even don't mind the EA getting what he wants , joking aside, why should I ?

As for me:

I lock down on the sale of the house at a price I am comfortable with.

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What do you suggest I do if its a house which for various reasons suits me very well, and where similar is unlikely to come up again within the timeframe in which I want to buy?

Genuinely interested to hear suggestions.

Also to hear from people who have experience of agreeing a 'long' completion date, to see what they think.

I bought my house years ago and had a long completion date (about 6 months). It suited me as interest rates then were 13 - 15%,and at the time, it gave us a chance to save a bit more. House prices were relatively stnagnant at the time.

Given the present house price trend however I think it would take the shine off the new house if I paid more than it was valued at at the time I was moving in.

You know your own situation best, but as other posters have pointed out, you are being taken advantage of by the EA and the vendor, unless you are paying a much lower price than the current market value.

Look at it from the vendors point of view. Why do you think they want to set the price now and only complete the sale much further down the road. They are certainly not doing it to advantage you.

Where are you living in the meantime. If you are at home and not paying rent that's fine, if you are paying rent, then that's something else.

My advice would be to go back to the EA, tell him that you have thought the matter over,
and that you would be prepared to settle for a long completion date, only if you can have a reduction of 10% on the price you have already agreed.

Houses are not selling quickly at present and the EA is well aware of this, so rather than let the sale go, he may advise the vendors to accept your offer, or else reach a mutually acceptable price, taking into account that (from your point of view) that prices are certainly going to fall. The only question is how far.



Murt

Thanks for the useful comments Murt, I am feeding them into the thought process. Some responses below, and please don't think that I am being contrary, as you say, I know more about this situation than anyone else on this board:

Given the present house price trend however I think it would take the shine off the new house if I paid more than it was valued at at the time I was moving in.

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OK, and as I say that is true if one feels that prices have further to drop.

Also, as regards taking the shine off, fair comment but that would also be true if I bought, moved in immediately, and by autumn the valuation had dropped. Maybe psychologically not as painful, but really the same thing.

You know your own situation best

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That's true, thanks, and I don't want to spell out all my details for the sake of anonymity.

but as other posters have pointed out, you are being taken advantage of by the EA and the vendor, unless you are paying a much lower price than the current market value.

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Fair point.

Look at it from the vendors point of view. Why do you think they want to set the price now and only complete the sale much further down the road. They are certainly not doing it to advantage you.

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Agreed. But as I keep saying, a deal only works when everyone gets what they need out of it - correct?

Arguably they are taking a view on the house, and on their own personal circumstances, and on the market conditions, and in summary are willing to sell under certain conditions. I am not psychic, so I have no way of knowing how far to push them in terms of price and conditions. No buyer is psychic. Neither is any vendor. So its a judgement call on both sides - correct?

Where are you living in the meantime. If you are at home and not paying rent that's fine, if you are paying rent, then that's something else.

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I agree, of course that is a factor in the equation.

My advice would be to go back to the EA, tell him that you have thought the matter over,
and that you would be prepared to settle for a long completion date, only if you can have a reduction of 10% on the price you have already agreed.

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I can tell you quite simply that this would not wash. From the whole history that I have gleaned, the vendor would not sell at that price, nor do I have any reason to believe that they are under any pressure to sell. It's easy for people outside the game to advise hardball tactics but remember they don;t always work and they can easily backfire. So, I have to be realistic, obviously working within my own limits as well.

Houses are not selling quickly at present and the EA is well aware of this, so rather than let the sale go, he may advise the vendors to accept your offer, or else reach a mutually acceptable price

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Yes, the EA's job is to make the deal happen, and that means that both sides need to be reasonable and realistic. There are plenty of people (present company excluded) who advocate ridiculous stances when bidding on a house, but you have to ask yourself - how many deals have they completed? Anyone can go in and be a messer, and usually they are just wasting everyone's time including their own.

Any more comments are welcome, especially as regards the enforcability of the completion date in this scenario.

In my experience (as an EA), penalty clauses are difficult to enforce and tend not to be included in contracts for residential properties.

Solicitors acting for buyers and sellers have told me they rarely try to include them as they are impossible to enforce.

Hi Eamonn,

The first thing that needs to be decided and agreed upon is the completion date, don't let it be in a few months, have an actual date. Secondly as others have stated, the deal as it stands is totally infavour of the vendor, and we all agree that it is a buyers market so that doesn't quite ad up. The easiest solution would be to decide a reasonable date and agree that on signing contracts that you will not pay the 10%, but will pay on the completion date. This would keep them focused on a date and not let them mess you about. I don't think you should view it as rocking the boat its more about providing some security for yourself.

Lobby said:

In my experience (as an EA), penalty clauses are difficult to enforce and tend not to be included in contracts for residential properties.

Solicitors acting for buyers and sellers have told me they rarely try to include them as they are impossible to enforce.

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Thanks Lobby, that is what I was thinking myself.

Thanks MrMan for responding.

MrMan said:

Hi Eamonn,

The first thing that needs to be decided and agreed upon is the completion date, don't let it be in a few months, have an actual date.

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Thanks, will definitely do that.

The easiest solution would be to decide a reasonable date and agree that on signing contracts that you will not pay the 10%, but will pay on the completion date.

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That's a good idea but I have a feeling that the EA will tell me that the vendor will not agree to that. I bet they will say that if I have no deposit down, they have no security, and that they won't deal on that basis.

Not being defeatist, I will certainly try it.

Sounds like the bottom line is that, just like any other sale, I have no guarantees, but that all I can do is make sure I have an agreed completion date before I sign, try to work on the basis that no money changes hands until completion, and then to keep the pressure on to achieve the completion date.

Any other thoughts / replies most welcome.

That's a good idea but I have a feeling that the EA will tell me that the vendor will not agree to that. I bet they will say that if I have no deposit down, they have no security, and that they won't deal on that basis.

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Or at least pay a small deposit say €5,000. Just tell the EA that you want to close but you don't want to put yourself in a position that you are at the mercy of the vendor. All EAs are telling vendors not to hang about when it comes to closing, so the EA will prob be on your side, he won't want a long drawn out closing period, keep him on your side and see what he can do for you. Once the EA sees that you are very keen to close but are understandably unsure about the terms of the sale, he might start working a little harder on the vendor.

Thanks again.

I assume the EA does not get paid until completion, so there's a (small) inbuilt incentive for him to keep the ball rolling.

Not in his interest to have to wait for his cash (although I guess he is probably not to live or die by it), nor is it in his interest to leave the deal hanging, as the longer it goes on, the more potential for it to fall apart?