Buyer Demands 10% Discount After House Sale Exchange

Navigating a Sudden Request for Price Reduction in Property Sale

Recently, a couple found themselves in a distressing situation after exchanging contracts for the sale of their home. Anticipating their move in just two weeks, they were blindsided when the buyer requested a 10 per cent reduction on the agreed sale price. The buyer claimed that after obtaining a second opinion on the property survey, they believed substantial repairs were necessary.

With the buyer threatening to withdraw if their demand was not met, the couple faced a daunting predicament. Their legal counsel indicated that the contract was legally binding, meaning the buyer would forfeit their deposit—equivalent to 10 per cent of the home’s value—if they chose to back out. This unexpected turn of events put the couple’s plans at risk; after a year of trying to sell, failure to complete the sale could jeopardise their onward purchase, which had not yet been finalised.

Understanding the Buyer’s Position

Ed Magnus, a property expert, emphasised that it is quite unusual for buyers to attempt to renegotiate the price after contracts have been exchanged. While some buyers may attempt to negotiate a discount prior to this stage, doing so post-exchange is rarely successful. Often, issues uncovered in surveys are used to leverage for a price reduction. However, in this case, the timing of the buyer’s demand may have been their undoing.

To provide clarity on the legal ramifications, experts Andrew Boast, co-founder of SAM Conveyancing, and Mike Hansom, a property litigation consultant at BLB Solicitors, weighed in on the situation.

Legal Obligations of the Buyer

According to Andrew Boast, once contracts are exchanged, the buyer is legally bound to honour the agreed price. At this stage, a 10 per cent deposit is paid to the seller’s solicitor, solidifying their commitment to complete the purchase on the scheduled date. Should the buyer withdraw out of mere preference, they would be in breach of contract.

In such instances, the seller’s solicitor has the authority to initiate a notice to complete, granting the buyer 10 working days to fulfil their obligation. Failure to do so results in the forfeiture of the deposit, alongside liability for additional costs, including the seller’s legal fees.

Options for the Seller

Mike Hansom outlined several options available to the seller in this scenario:

1. Rescind the Contract: If the buyer fails to complete, the seller can rescind the contract and retain the deposit. They may also seek compensation for incurred losses, such as moving expenses and conveyancing fees.

2. Pursue Specific Performance: The seller could opt to sue the buyer for specific performance, compelling them to adhere to the original terms. However, this route can be lengthy and costly.

3. Renegotiate: The buyer’s request for a price reduction introduces the possibility of renegotiation, though without any legal grounds for their claim, the seller holds a stronger position in negotiations.

The Validity of the Buyer’s Survey Concerns

Andrew Boast clarified that if the buyer had been awaiting survey results, they should not have agreed to the exchange. Renegotiating based on a negative survey outcome is not legally justified, as properties are sold on the principle of ‘caveat emptor,’ which places the onus on the buyer to assess the property’s condition prior to contract exchange.

Mike Hansom added that the buyer’s obligation to verify the property’s state before proceeding is paramount. Their risk in moving forward without confirming necessary repairs is theirs alone, unless there were undisclosed issues or misleading information from the seller, which does not appear to be the case here.

Recommended Actions for the Seller

In light of the buyer’s unexpected request, Mike Hansom advised the couple to take a firm stance. Through their lawyer, they should articulate that the buyer’s rationale for a price reduction lacks legal merit. They ought to warn the buyer that failure to complete by the agreed date would result in a notice to complete, allowing them 10 working days to finalise the purchase. Should they fail to comply, the couple would reserve the right to rescind the contract or pursue legal action for specific performance.

Andrew Boast acknowledged the couple’s concerns about potentially losing their buyer but noted that retaining the deposit could outweigh the risk. If the buyer is losing patience, offering a goodwill gesture to maintain the deal while they seek another buyer could be a prudent strategy. However, if they entertain reducing the sale price, they should ensure that the buyer secures a revised mortgage offer to match the new price within the stipulated notice period.

Ultimately, the couple must ascertain that any issues raised by the buyer are legitimate rather than a last-minute ploy to extract more favourable terms. Requesting a copy of the buyer’s survey report would provide clarity on the specific issues they claim to have discovered. This diligent approach ensures that they are not taken advantage of in a high-stakes transaction.