Help! Probate Issues

[DrKidd]

Hello all! This is my first post so I hope I have put it in the appropriate topic

I’m a little bit stuck with a problematic property purchase I’m going through. In fact, my head is spinning so much I’m not even sure how to specify the problem! But any advice offered will be appreciated and considered. Hopefully someone here can help

It’s a little bit long, but this is my story...

I’m a fairly new property investor. At 30 years old my portfolio contains just the flat that I live in and 1 buy-to-let 2bed maisonette, both on the same road in West London. My 3rd property purchase is underway. A fairly similar profile to my 2nd excluding a renovation. In other words, I’m purchasing another 2bed maisonette. However, I’m having troubles getting this one over the line.

It started in the first quarter of 2013. I viewed a very run down property which I was told someone had recently passed away in. An offer was made and agreed in May 2013 for the sum of £203k. 15months later and I’m still trying to exchange. At the time which the offer was made, I was told by the estate agent probate had been issued and it was being sold by the next of kin.

Slightly neglected the property needs full modernisation. I approached with caution instructing a full structural survey in addition to the mortgage valuation survey. Both came back fine and I was given my BTL mortgage in principal status. Weeks pass I it becomes apparent that probate has not been issued. I chase down the chain and my solicitor speculates there may be a family feud in the background which is slowing the process down. Months down the line and two mortgage extensions later, my mortgage in principal expires. Money down the drain

After regular chasing, in June 2014 I hear probate will finally be issued within the next 6weeks. Great, time for another mortgage!

The price of the property is held the same so by now my potential investment has become increasingly lucrative. My plan is to now refinance as soon as I have renovated to release equity for me to buy myself a house to move into. Because of this, my broker finds me a lender with no early repayment charge with rates favourable to the amount of deposit I have saved. The lender now is a small secondary lender which I later find out does not have my current solicitor on their approved panel.

The new lender instructs another valuation. Only to my surprise the report this time comes back concluding the property uninhabitable and therefore unmortgagable! I quickly arrange for another viewing to check the place hasn’t fallen down in the last 15months. But when I got there it was in the exact condition as when I last viewed it. The valuation report gives no clues as to why they think it is uninhabitable. There’s a functioning kitchen and bathroom so I’m not sure what the problem is.

After asking around, its suggested to me that what i can possibly do is proceed without a mortgage, exchange, renovate and then complete. Sounds risky but I’m confident my project manager can renovate quickly. My broker convinces the lender to offer me a mortgage in principal on a 100% retention subject to a satisfactory valuation report post renovation. Only my solicitor is not happy with this and now knows they’re not on the approved panel anyway. Found a new approved solicitor

Hurdle after hurdle, I’m now stuck with do I go ahead and instruct a new solicitor? If the probate has not been issued do I keep throwing money at this in the hope I finally get to exchange? And I taking on too big a risk trying to renovate in the small window that lender has outlined?

I feel like im chasing a carrot being dangled in front of me on the carrot is getting bigger and the stick longer! I think I’m looking for reassurance more than anything. But if anyone can make suggestions to how I do this intelligently or knows of anything I have missed, your input is very much welcome!

Thanks for reading.

David

[DrKidd]

Thanks Richard. Exactly the kind of input I needed. I've got the estate agent on side and he's assured me that the price wont move.

The conditions of me exchanging and then renovating and revaluing is subject to a delayed completion date and my being able to provide a schedule of work, realistically priced, to the lender and evidencing that I have funds to cover the deposit and planned works. I currently have 20% and I'm pulling together everything I can to evidence I have enough to cover the schedule of work.

I have a lot of friends in the trade including a project manager, electritians, plumbers etc

so realistically, I will get a good price on the renovation.

is it a 30% minumum for bridging finance?

I know my mortgage broker doesnt have access to these products. Can you point me in the direction of someone who can?

Cheers

David

[Lee Moffatt]

Hi David,

 

I'm actually in the exact same position as you.  I offered on a 3 Bed house in the first quarter of 2013 and was told that the owner had moved abroad and granted power of Attorney to their solicitor to handle the sale of the property.  The property was in bad shape as it had been empty for over a year and had suffered from neglect with severe damp and some structural movement.  However this is was nothing particularly serious that I could get fixed as part of the refurb.  With my mortgage sorted I instructed a full structural survey which highlighted my suspected issues but the lenders were happy for me to proceed. 

 

Literally days from exchange I was told that the vendor passed away and that the solicitor with Power of Attorney no longer has the authority to sell the property.  I was told by the agents that the family still wishes to sell the property as they are abroad and it should take them a few months to sort out the probate. I decide to wait it out.

 

3 Months turned into 6 months, then 9, two more mortgage offer renewals then up until a few weeks ago I'm finally told that the probate has been granted and they are able to proceed with the sale but now they have heard that the area the house is in has gone up by nearly 40% and wants a significant increase on the original offer price. 40% increase is rather ridiculous especially given the condition of the property.  I manage to negotiate an increase of 25% which while I'm not happy with, it the deal still stacks up given where the market is today.  My Solicitor informs me that my searches are out of date now so I've just had to fork out  another £500 to get them redone. With an increase in the price I need to go back to the lender to get an offer on the new amount.  Mortgage goes through with no issues subject to a valuation and another £600 lender valuation fee.

 

The valuation then came back with a 'NIL' value as the surveyor now thinks the property is not mortgageable given the current condition of the property.  When the report came back highlighting the reasons, they were the same issues highlighted in the original structural report which they were ok about last year.  The property hasn't changed since we originally viewed it.

 

The options i am looking into:

 

• Follow up with the lender to find out why the issues found in the old report were not an issue before but are an issue now.
  
• Get a structural engineers report and find out the cost of fixing the issues in question.  The lender may be able to offer a retention on just the remedial works.
  
• Arrange an exchange with keys access and a delayed completion which would allow the issue to be fixed so that the bank can release the funds.
  
• Bridging finance to purchase the property then get the mortgage once the remedial works are done to pay off the bridge (this is probably the most expensive option)
  

 

Unfortunately my vendor is seeing pound signs with the London property market going through the roof and so is not being very co-operative.  He thinks he is in a position of power and thinks people are lining up to buy the property at full market value irrespective of the condition.

 

Best of luck with the deal David and keep me updated on you progress.  It's nice to know I'm not the only one in this boat.

[DrKidd]

Glad I put this post out there now!

"Arrange an exchange with keys access and a delayed completion which would allow the issue to be fixed so that the bank can release the funds."

Your above point is what i planned. Because My lender has no early repayment charge theres a almost a 5k arrangement fee. Now I'm wondering if bridging would cost greater than 5k?

Defintely something to look into! Thanks

[DrKidd]

Update! A week before Christmas I finally exchanged. The mortgage was on 100% retention subject to bringing the property to a suitable standard. Very risky and vague terminalology however, I got some cheap labour in, renovated and successfully passed the reinspection by the banks surveyor

I will complete in the next week or so!

Moral of the story here, perseverance pays off!

[Tim Wragby]

Well done - a good ending.  I bet the estate agent is breathing a sigh or two too as they should not have said that probate had been secured when it had not!  You probably could pursue that if you so chose under Consumer Protection regulations, but as they secured the original asking price it is probably churlish.  Next time get them to confirm via email/ writing that probate has been achieved.

 

Did you ever find out why the property was uninhabitable?

 

Best wishes for getting it let out

[DrKidd]

Hi Tim,

I didnt find out specifically, but generally, it was in such bad conditionn the surveyor put a rental income of £0

So once i had the flat cleared, and painted, a bit of light plastering, the surveyor came back in and agreed that it would achieve the rental income needed to get the mortgage. I was on site when the surveyor came back. I'd like to think my polite manner and knowledge of the local area helped the surveryor put a realistic figure on the report

[PaulDavidThomas]

Phew... I'm at the end of a 3 month ordeal and I thought I had it bad. I was considering beer. If feel a lot better now. Alas, at your expense - sorry. 

 

Give a few months and you will forget the pain you went through...

 

Well done...

[Nicolina Andall]

I've had a few hiccups on my property journey ... But reading this made me feel stressed! Well done !!! Brilliant - everything else will seem like a walk in the park after that.... Keep up the great work!

[DrKidd]

Thanks both

I'm now in the midst of a deep renovation flowing the completion. Can't wait to finish, stand back and suck up what I've accomplished!

[Kevin Wright]

well done for persevering Dr

Thanks for the mention Richard.

Point to note re getting a BTL mortgage as per the questions asked...habitability relates to main res mortgages only, for BTL mortgage the bar is set higher in terms of its rentability. It may have a kitchen and bathroom and technically be habitable but seriously, is a tenant going to pay good money to rent it in that condition? If they surveyor thinks not your mortgage will be declined.

one other point to note if you intend to do the refurb between exchange and completion then use a mortgage to complete...every mortgage lender at point of completion will ALWAYS lend on the LOWER of the purchase price of value.

 

Bridgers usually lend 70% of the purchase price but a few lend 70% of the value; meaning, if bridging had been needed for this case, a smaller than 30% deposit would have been sufficient