Selling house before keys handed over...

Hi,

My partner and I, first time buyers, have signed a contract for a new house that is currently being built.

Is there any way out of the contract without incurring a charge? I know the answer to this may sound obvious but before we signed this contract we came across a situation where an auctioneer was selling a house for a person where the keys of the house had yet to be handed over - it was a new house. Basically the situation was that the current owner would make a quick profit on the sale without the property developer knowing anything and when it came time to hand over the keys, we would get them.

Can anyone inform me of the legality of such a deal? Would such a move affect out first time buyers status?

Has anyone else gone through this before - if so, how did it work out, and is this something I should be thinking about? At the time we thought the whole thing smelled a bit off so we stayed clear of the house - but it was interesting to note that an auctioneer and his solicitor were involved so it couldn't have been too shady...

thanks for your time!

This sounds like a subsale. Its not illegal, but sometimes the property developers consent is needed for the sale, depending on the documentation signed. As long as the property has never been occupied, the new house status is fine. I'm a little confused though, are you trying to buy this house from the person who is contracted to purchase, or do you want to sell a house that you have contracted to purchase?

Thanks Vanilla, We are currently contracted to buy the house - we are wondering what would be involved if we were to sell it before getting the keys without incurring a fine from the developer

Hi Lola

What you are referring to is a technique called "flipping the property". It has been used by many property investors to make a quick profit. It is perfectly legal but there are considerations.

1. Clearly, you will need to identify a buyer who is able to complete on the same day you complete. Co-ordination of this is in practice challenging. The choice of solicitor here is crucial. Some advisors don't go near these deals because they are not familiar with them and therefore think that there is some problem with them. Ignorance can be expensive.

2. You would be liable to Capital Gains tax on the profit since it is not a principal private residence. Stamp duty would also need to be clawed back if you availed of any exemptions.

3. I'm not sure but you would probably lose your FTB status.



Ideally, all this is worked out before you buy a property. If you have already signed a contract, then unless the reasons why you decided to do so have radically changed, i would suggest you stick to your original plan and not be distracted by what others are doing or might be doing.



t

Hi Theo, thanks for the information, much appreciated!

Does any one know how to sort out a deed of rectification when selling a house

Talk to your solicitor? Presumably there is a title issue and if all parties are in agreement to resolve, then it should be easy enough. If parties are not in agreement about what is to happen, then obviously that is an entirely different matter. And everything may be held up or even entirely stymied pending resolution.

mf

Thanks for that, I think I'm going to loose the sale of my house and then the purchase of the new property over this.