Is it risky to delay the completion date when selling our home?
Q I have an unusual situation I’m hoping you can help me with. We are in a relatively short property chain – we are selling our current house to first-time buyers, and we are buying a house from people whose onward purchase is the end of the chain.
They want to do a substantial amount of work to the property they are buying and have suggested that the whole chain exchanges contracts in March but with a completion date for our purchase of their property and the sale of our property in July. They would then complete on their onward purchase, which would give them four months to complete their work before moving in (presumably with some kind of bridging loan to cover the gap). They would like to avoid moving into rented accommodation in the interim, and don’t want to live in the house while the work is being done.
What are the risks for us and our buyers in this situation? My main concern is that if anything happened to the house we are buying in between exchange and completion then we’d still be committed to buying it – we would want to have buildings insurance from exchange but would any insurer be prepared to insure a property we don’t own and aren’t living in for such a long period?
What would happen if for some reason our buyers pulled out after exchange? I understand we would keep their 10% deposit but if it led to us pulling out of our purchase as well then we’d lose our 10% deposit, which is significantly more.
Are there any other risks or pitfalls to consider? And have you ever heard of a long-stop completion being used other than for new-builds? Our estate agent assures us it is common but I’ve never heard of it before.
A I can sympathise with the people you are hoping to buy from in not wanting to live in their (hopefully) new home while work is being done on it. But I’m afraid the sympathy stops there.
A long-stop completion is usually associated with new-builds where the contract between the buyer and the seller is completely different from the usual conveyancing process. According to Savills, there are usually two completion dates to be agreed when exchanging on a new-build: the “short stop”, which is an estimate of when the property will be finished, and the “long stop”, which is the date the developer must have finished the property or give you your money back.
To put it another way, if the developer fails to finish by the long-stop date you can get your deposit back and walk away without penalty or reschedule the date if you don’t want to back out. With the conveyancing process there is one completion date and that’s it. If you don’t complete on that date you don’t get your deposit back.
However buyers in other types of chains do sometimes agree to a delayed completion date like the arrangement your sellers are proposing. My main objection is that it seems to be at their convenience, not yours or your first-time buyers. It may be worth finding out how your buyers would feel about delaying completion until July. It could be that such a delay could mean them pulling out before exchanging because they don’t want to have to wait that long to move in or their mortgage offer will have expired by then. You may want to check the effect on your mortgage offer as well. The insurance thing is not really something you need to worry about as it is normal practice for the buyer to take responsibility for buildings insurance from the date contracts are exchanged.