Buying an apartment in 2 days - or not? What to do?

How to avoid signing your life over to a mortgage
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Bankai
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Buying an apartment in 2 days - or not? What to do?

Post by Bankai » Wed Jan 10, 2018 2:59 pm

We made an offer for a flat 2 months ago which was accepted and the completion/entry date is on Friday, however:

There's a planned re-decoration of the common areas scheduled to take place in Spring. Factors managing the property don't have estimates of the cost yet. Our solicitor put a condition in the contract that the seller should be liable for this. Now, this was a month ago and the seller's solicitor only came back to us after the close of business today, advising they do not accept this condition.

So, we either accept their amendment and pay for it ourselves, or we push it back. This looks to me as an attempt to put a gun against our heads by the sellers and we have only tomorrow to negotiate*.

Our situation: £1k sunk cost in solicitor's fees. Our lease runs out in 10 days and we'd need to either stay with friends for a few weeks (inconvenient), find short-term lease (difficult and expensive) or airbnb + self-storage (expensive). Also, we'd need to start looking for a new flat again, best case scenario is we immediately find something we like and move in in 2 months - additional cost for rental would be ~£2k.

Seller's situation: a family of 4 planning 3rd child and buying a larger house. We are the beginning of the chain so possibly if our sale falls through, they won't be able to buy either. In which case their sunk costs would be substantially higher (solicitor fees for both the sale and the purchase, real estate fees for re-listing the property). They would then need to wait at least another 2 months before their house sells, and would probably need to look for a new house since the one they're buying would likely not be available anymore. Also, since we are to get the keys on Friday, they are likely to either be moving tomorrow or have already moved. All this makes me think that we have stronger negotiating position, although our worst-case scenario is also worse since they can always just stay where they are.

Our options:

1) Bite the bullet - we will need to pay additional £500 - £2000 (guestimate)? No risk, no reward, a bit of self-respect lost.
2) Push back but accept their terms if they push back again - worst case as above, best case they agree and we don't need to pay anything + self-esteem boost.
3) Offer to split the cost in half - might be seen as a sign of weakness and make them push harder? Worst case - see 1), best case, we only pay half.
4) Push back and if they decline, go to point 3) - might be seen as showing good will and make them want to meet us halfway through? Best case, we pay nothing, worst case - see 1) + more self-esteem lost.
5) Push back multiple times, being prepared to eventually capitulate - best case we pay nothing, worst case see 4)
6) Push back no matter what, be prepared for the transaction to fall through - the best case we pay nothing, worst case Airbnb for next few weeks/months.

Option 2 seems superior to 1, option 4 seems superior to 3. 1 seems the worst. 6 seems the highest risk/reward.

Now, we are both with my wife trying to be rational and logical about this. She is happy to push back a little but doesn't want to lose the flat and end up in airbnb. I'm happy to take more risk, possibly all the way up to 6) considering our negotiating position is (in theory) stronger and they have more to lose. Either way, I will speak to our solicitor first to get his advise, but are leaning towards pushing back and taking a wee gamble.

Thoughts?

* other option is that this is their solicitor's fault - they are using very cheap solicitors who spend tons on marketing, take a lot of business in and then struggle to complete everything. Our solicitor chased theirs twice today since they eventually responded to the letter from a month ago.

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Fish
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Re: Buying an apartment in 2 days - or not? What to do?

Post by Fish » Wed Jan 10, 2018 3:34 pm

Does the seller have a backup contract (potentially more lucrative than your offer)? Is there a possibility where if you do not accept their terms, then your contract is void and the seller is free to accept another party’s offer (presuming they have one lined up)? I wonder if that may be causing the situation.

Ever since Jacob introduced me to Cipolla’s Basic Laws of Human Stupidity, I’ve been much less inclined to do things “on principle” and instead focus on results... am I creating intelligent (win-win) outcomes or following my instincts into stupid (lose-lose) traps?

I suggest asking for a reasonable estimate of the cost (500-1,000 GBP) credited to you at closing, so the seller can close the books on the transaction and not have a liability hanging into the spring. If the seller declines, then pay up or walk depending on your preference. Personally, I dislike conducting business transactions and under my value system it seems like a small price to pay to get the house-hunting stage over with. Just imagine yourself as a wealthy 70yo looking back on this transaction. Would you regret having walked away and subjected yourself to unnecessary hardship over a pittance, or be upset that you gave in to the seller? I think you’ll find your answer there.

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Bankai
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Re: Buying an apartment in 2 days - or not? What to do?

Post by Bankai » Wed Jan 10, 2018 4:08 pm

Thank Fish, all good points.

Re: back up seller - we have no way of knowing this, however, it's unlikely. Other than us, there was only 1 other note of interest and they either offered less or didn't offer anything. Also, as this was 2 months ago, they probably bought something else by now.

Re: doing things 'on principle', I totally agree. I see this more as a low risk, high potential reward situation, i.e. by pushing back a little we might be, say, £1k ahead unless the seller becomes unreasonable and decides not to sell (on principle?). The self-esteem bit I mentioned is not very important here.

I like your suggestion about asking for a fixed sum - this should be quite appealing to the sellers as it limits their liability.

And yeah, the sum involved probably doesn't justify walking away...

7) Ask for a fixed sum to cover the future repair?

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Fish
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Re: Buying an apartment in 2 days - or not? What to do?

Post by Fish » Wed Jan 10, 2018 4:34 pm

Please take this as the constructive criticism that it is intended... but “seller responsible for post-closing assessment” seems like a noob clause to write into a contract.

It’s possible it was missed when the contract was initially reviewed (assuming this isn’t standard practice in your country) and was caught during preparations for closing. In principle, you are right, it was agreed to, etc. but it should have just been factored into the sale price.

Also, since you (not the seller) will get to enjoy the improved common area, there is some logic in the burden of that remodel cost falling on you. Maybe feel a little better about paying it if that’s how it ends up.

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Bankai
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Re: Buying an apartment in 2 days - or not? What to do?

Post by Bankai » Wed Jan 10, 2018 5:20 pm

No problem, this might be just one of the differences between the legal systems. As far as I understand, real estate sales contracts in Scotland are based on 'Scottish Standard Clauses' which is sort of a starting point for a contract, to which both sides then request amendments until an agreement is reached. The original Clauses have the following point in them:

"...the seller will be responsible for all common repairs and improvements carried out, instructed or authorised on or prior to the Date of Entry"

So the seller wanted this point removed. We replied back saying we don't agree since the repair was instructed prior to the date of entry. Now, a
month later, they came back at the last minute saying they still don't want to pay it.

They also mentioned they still don't know how much this would be, but neither do we. In those circumstances, your suggestion of a fixed amount seems very reasonable, at least to me.

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Kriegsspiel
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Re: Buying an apartment in 2 days - or not? What to do?

Post by Kriegsspiel » Wed Jan 10, 2018 6:03 pm

It looks like you're really sticking it to them, and over such a paltry sum. I mean... do you want the place or not?

I wouldn't let two grand get in my way if the price is still right. I definitely wouldn't roll up my self-esteem/self-respect in it, it's just a real estate negotiation.

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Riggerjack
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Re: Buying an apartment in 2 days - or not? What to do?

Post by Riggerjack » Wed Jan 10, 2018 6:04 pm

So you had a offer, it was accepted, and now you are right up on your closing date, and this unspecified assessment still isn't specified. Seems reasonable that this came up now.

The flat sum seems like the easy solution for you. Just ignoring it seems like the easy solution for the sellers. I'm not surprised that they tried to play it that way.

So my first question is what is the penalty to the seller for backing out of the contract? Because that is where I would look for a number. For instance, if the assessment looks like it would be 5k, but the penalty is only 2k, I would counteroffer 5k, and compromise down to 2k. Yeah, I could be out 3 or more k, but better than 5k, and the deal still goes through.

Good luck!

saving-10-years
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Re: Buying an apartment in 2 days - or not? What to do?

Post by saving-10-years » Thu Jan 11, 2018 6:03 pm

Thinking of what you have said about their circumstances they may be anticipating that they will be spending money on new home and new family member so not knowing how much money they may owe you and when could be additional stress for them. So paying an amount now which is a certain amount and takes care of the problem could be a really neat solution for them too. Hope it all works out.

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Bankai
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Re: Buying an apartment in 2 days - or not? What to do?

Post by Bankai » Wed Jan 17, 2018 6:29 pm

This proved to be a much smaller issue than I anticipated. Although we did not get the estimates for the works planned (these are not ready yet), factors advised that the last time a similar re-decoration was carried out, the cost per apartment was below £200. Based on this, we agreed to pay for it ourselves since even if it happens to be 2-3x as much as the last time, it won't be a big deal.

Everything else went well and we moved in on Saturday. Almost done unpacking boxes... almost...

rube
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Re: Buying an apartment in 2 days - or not? What to do?

Post by rube » Thu Jan 18, 2018 2:38 am

Glad it turned out well, enjoy your new place Bankai!

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