Good Lawyer Guide's response

The property slump has meant that many properties are worth less than they were. So, you are not alone in having agreed to buy a property for more than it is now worth.

If you exchanged contracts to buy the flat, then you entered into a legally binding contract. So, you have no choice but to go ahead and buy – even if the ‘value’ of the flat has since gone down. Typically, this is a problem with new-build property where it was common for people to put down deposits, in the expectation that the property would have gone up in value when it was finally built (perhaps a couple of years later). Now, those property speculations are coming home to roost.

The bottom line is that there is a binding contract and you are obliged to complete the transaction. If you do not then the seller can forfeit the deposit (often 10% that you put down when you signed. And if his losses are more than that, then he can sue you for the extra difference!

Your really should try to negotiate with the seller. Most people in this situation will find that they cannot get a mortgage (because the amount they were going to borrow is now too high a percentage of the current market value). So, the seller may have to face the reality that there is not much he can do about you refusing to complete – apart from forfeit your 10% deposit.