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  • FIRST POST
    • Yazmina
    • By Yazmina 13th Jul 17, 12:13 AM
    • 81Posts
    • 19Thanks
    Yazmina
    Buyer only has 2% deposit
    • #1
    • 13th Jul 17, 12:13 AM
    Buyer only has 2% deposit 13th Jul 17 at 12:13 AM
    I am in the middle of a chain. I agreed to sell my flat back in April and expected to exchange this month. The buyer's deposit should have been £30k but the EA told me he only has £16k. I told my solicitor who had not been informed of the low deposit by the buyer's solicitor.

    My solicitor later forwarded an email from the buyer's solicitor saying the buyer would only have £7k to exchange with on 28th July. This was later increased to £10k.

    We (me and hubby) have had an offer accepted on a house and the vendor has indicated (via EA) that she will not be happy with a low deposit.

    With no-one able to tell me why the buyer's deposit was not confirmed at the outset (by the bank or the solicitor), our options are:

    1. Walk away.
    (We really like the house, 😔 It's convenient for hubby's early starts and nothing that I like has come on the market in our price range since we stopped actively searching in May).

    2. Ask buyer to get a bridging loan.
    Solicitor's suggestion. Buyer could refuse. Not sure lenders like deposits boosted by loans.

    3. Use the last of my savings to boost deposit on my purchase.
    I'll have no savings left. I'll be hopefully saving my purchase, but helping the buyer to get a flat he apparently can't afford.

    Thanks.
Page 1
    • PersianCatLady
    • By PersianCatLady 13th Jul 17, 12:35 AM
    • 319 Posts
    • 307 Thanks
    PersianCatLady
    • #2
    • 13th Jul 17, 12:35 AM
    • #2
    • 13th Jul 17, 12:35 AM
    We (me and hubby) have had an offer accepted on a house and the vendor has indicated (via EA) that she will not be happy with a low deposit.
    Originally posted by Yazmina
    Just to clarify, you asked the seller of the house that you want to buy if they would accept a lower deposit because your buyer hasn't got the full deposit to buy your house??

    Is this correct??
    • Yazmina
    • By Yazmina 13th Jul 17, 12:39 AM
    • 81 Posts
    • 19 Thanks
    Yazmina
    • #3
    • 13th Jul 17, 12:39 AM
    • #3
    • 13th Jul 17, 12:39 AM
    Just to clarify, you asked the seller of the house that you want to buy if they would accept a lower deposit because your buyer hasn't got the full deposit to buy your house??

    Is this correct??
    Originally posted by PersianCatLady
    Er...yeah.
    • 00ec25
    • By 00ec25 13th Jul 17, 12:52 AM
    • 4,361 Posts
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    00ec25
    • #4
    • 13th Jul 17, 12:52 AM
    • #4
    • 13th Jul 17, 12:52 AM
    Er...yeah.
    Originally posted by Yazmina
    patently a 10% deposit from your purchaser will not be a 10% deposit by the time you pass it on to your vendor if the place you are buying is costing more than the one you are selling

    such situations are common (the norm?) and the usual is for you to negotiate with your vendor to get them to accept a smaller deposit from you

    however, it appears you have already done that and they are refusing.

    your options are therefore those you have outlined. Pick one and run with it. Many people would pick your option 3 ....

    it is down to you and your solicitor to agree terms of the contract with your purchaser as to the size of deposit. Once you exchange then your purchaser has to pay that sum. I agree it s a risk if you think he won't but that is what you pay your solicitor to manage for you - the repercussions of him defaulting on the deposit.
    Last edited by 00ec25; 13-07-2017 at 12:56 AM.
    • PersianCatLady
    • By PersianCatLady 13th Jul 17, 1:13 AM
    • 319 Posts
    • 307 Thanks
    PersianCatLady
    • #5
    • 13th Jul 17, 1:13 AM
    • #5
    • 13th Jul 17, 1:13 AM
    With no-one able to tell me why the buyer's deposit was not confirmed at the outset (by the bank or the solicitor), our options are:

    1. Walk away.
    (We really like the house, 😔 It's convenient for hubby's early starts and nothing that I like has come on the market in our price range since we stopped actively searching in May).

    2. Ask buyer to get a bridging loan.
    Solicitor's suggestion. Buyer could refuse. Not sure lenders like deposits boosted by loans.

    3. Use the last of my savings to boost deposit on my purchase.
    I'll have no savings left. I'll be hopefully saving my purchase, but helping the buyer to get a flat he apparently can't afford.
    Originally posted by Yazmina
    Here are my opinions on your options:

    1. Absolute last option.

    2. It either sounds as if your buyer doesn't have the ability to raise the necessary funds or that he has decided to try and pull a fast one on you and get £20,000 off of the price. Was there much interest in your house from other potential buyers? Could you try and find another buyer??

    3. I couldn't bring myself to basically give away £20,000 of my money to enable someone else to buy my house. I definitely wouldn't do this.
    • Yazmina
    • By Yazmina 13th Jul 17, 1:34 AM
    • 81 Posts
    • 19 Thanks
    Yazmina
    • #6
    • 13th Jul 17, 1:34 AM
    • #6
    • 13th Jul 17, 1:34 AM
    Here are my opinions on your options:

    1. Absolute last option.

    2. It either sounds as if your buyer doesn't have the ability to raise the necessary funds or that he has decided to try and pull a fast one on you and get £20,000 off of the price. Was there much interest in your house from other potential buyers? Could you try and find another buyer??

    3. I couldn't bring myself to basically give away £20,000 of my money to enable someone else to buy my house. I definitely wouldn't do this.
    Originally posted by PersianCatLady
    It took two months to find a buyer for a good condition, one bed flat, near loads of transport in London. There was an initial flurry of viewings then nothing for six weeks. EA has a lot of sold boards on our street and surrounding streets, but I can't find evidence that anything's really moving. I fear that our vendor won't wait for us to find another buyer. This is the second time she's tried to sell. The first sale fell through because the buyer couldn't get the mortgage.
    • 00ec25
    • By 00ec25 13th Jul 17, 2:34 AM
    • 4,361 Posts
    • 3,710 Thanks
    00ec25
    • #7
    • 13th Jul 17, 2:34 AM
    • #7
    • 13th Jul 17, 2:34 AM
    3. I couldn't bring myself to basically give away £20,000 of my money to enable someone else to buy my house. I definitely wouldn't do this.
    Originally posted by PersianCatLady
    eh?

    the OP will not exchange on his purchase until such time as his buyer exchanges with him, so the Op is not "giving away" 20k of his own money.

    it does not enable someone else to buy his house. It enables OP to buy the house he wants.

    Granted that having exchanged with his purchaser there is a risk the purchaser will fail to complete, but again, that is why there are solicitors involved in the chain, and they should be kept up to date on what is happening and increased (or deceased) risks arising from the actions of the purchaser.
    • G_M
    • By G_M 13th Jul 17, 4:02 AM
    • 40,188 Posts
    • 45,922 Thanks
    G_M
    • #8
    • 13th Jul 17, 4:02 AM
    • #8
    • 13th Jul 17, 4:02 AM
    Option 2

    Yes, where people are 'upsizing' they sometimes ask their seller to accept a lower deposit at Exchange but
    a) not that low, and
    b) the seller sometimes refuses, and
    c) your buyer has left this negotiation to the last minute

    Tell them to find the money (from family, bridging loan, whereever)
    • Yazmina
    • By Yazmina 13th Jul 17, 6:30 AM
    • 81 Posts
    • 19 Thanks
    Yazmina
    • #9
    • 13th Jul 17, 6:30 AM
    • #9
    • 13th Jul 17, 6:30 AM

    Granted that having exchanged with his purchaser there is a risk the purchaser will fail to complete
    Originally posted by 00ec25
    The buyer has said that he is relying on his monthly salary in order to complete. The sale was agreed in April he wants to exchange on 28th July and complete on 28th August. Buyers rarely fail to complete after exchange, but I don't know if there is a greater risk with this guy.
    • glasgowdan
    • By glasgowdan 13th Jul 17, 7:10 AM
    • 2,262 Posts
    • 2,509 Thanks
    glasgowdan
    Isn't this a common issue when someone's selling to buy another place and doesn't have a deposit of their own to use?

    If I were you I'd be using savings. Surely once you sell you can take back the savings from the proceeds.
    • silvercar
    • By silvercar 13th Jul 17, 8:28 AM
    • 35,524 Posts
    • 149,810 Thanks
    silvercar
    Another option is to exchange and complete on the same day, then there is no need for anyone to find a deposit.

    Once you have exchanged there is no going back, so would be very rare for your buyer to exchange without knowing he can complete; more likely he will start renegotiating on the day of exchange.

    Play the same game that your buyer is doing, tell your seller that you have a smaller deposit. Why should you be the one caught in the middle?
    • moneyistooshorttomention
    • By moneyistooshorttomention 13th Jul 17, 8:29 AM
    • 12,865 Posts
    • 35,333 Thanks
    moneyistooshorttomention
    Option 2

    Yes, where people are 'upsizing' they sometimes ask their seller to accept a lower deposit at Exchange but
    a) not that low, and
    b) the seller sometimes refuses, and
    c) your buyer has left this negotiation to the last minute

    Tell them to find the money (from family, bridging loan, whereever)
    Originally posted by G_M
    I'd agree with the "tell them to find the money" and the thinking behind my doing so would be that I simply wouldnt believe they were telling me the truth to say they didnt have it.

    They have no excuse for saying they didnt know - in 2017 - and all the Internet access we now have.
    Last edited by moneyistooshorttomention; 13-07-2017 at 8:34 AM.
    ploughing my own furrow...the rain begins with a single drop...

    #I'mWithNoel
    • saajan_12
    • By saajan_12 13th Jul 17, 8:32 AM
    • 578 Posts
    • 375 Thanks
    saajan_12
    Combination of option 2 & 3.

    Option 3 because: It is normal to pass on a exchange deposits up the chain, so when people are upsizing, the cash becomes a smaller % of the purchase price up the chain. If your vendor won't accept less than 10%, you will have to top up something from your savings. However this will reduce the balance you have to pay upon completion, so after this is paid, any remaining proceeds from your sale will come back to replenish your savings.

    (Unless someone fails to complete which is rare), you putting in extra exchange deposit doesn't affect your expenditure or savings at the end of the transaction.

    Option 2 because 2% is a very low exchange deposit. Yes, you have exchanged contracts that say if they fail to complete, you can recover the full 10% (or more if your damages exceed this) but you only have 2% in cash, the rest you would have to sue for and collect on, which is no easy feat. If they're struggling now to get any extra cash, you may have to force a sale of their assets (house?) which is even harder / more expensive.
    • always_sunny
    • By always_sunny 13th Jul 17, 9:21 AM
    • 3,127 Posts
    • 3,317 Thanks
    always_sunny
    It took two months to find a buyer for a good condition, one bed flat, near loads of transport in London. There was an initial flurry of viewings then nothing for six weeks. EA has a lot of sold boards on our street and surrounding streets, but I can't find evidence that anything's really moving. I fear that our vendor won't wait for us to find another buyer. This is the second time she's tried to sell. The first sale fell through because the buyer couldn't get the mortgage.
    Originally posted by Yazmina
    Was it overpriced? I find it hard to believe that the market in London is so down that it'd take 2 months!

    Still not sure what the problem is, if [your] buyer has only 2% deposit, how will they get a mortgage? Last time I purchased a property, the % of deposit is only relevant to get financing, the seller will not care as they will get the agreed price (minus their costs).

    Your only option is to find someone who can afford to buy your place. Current buyer doesn't.
    (I assume you have not exchanged as mentioned on the first post, so no one is in any binding obligations).
    Expat with an EU passport
    • saajan_12
    • By saajan_12 13th Jul 17, 10:09 AM
    • 578 Posts
    • 375 Thanks
    saajan_12
    Was it overpriced? I find it hard to believe that the market in London is so down that it'd take 2 months!

    Still not sure what the problem is, if [your] buyer has only 2% deposit, how will they get a mortgage? Last time I purchased a property, the % of deposit is only relevant to get financing, the seller will not care as they will get the agreed price (minus their costs).

    Your only option is to find someone who can afford to buy your place. Current buyer doesn't.
    (I assume you have not exchanged as mentioned on the first post, so no one is in any binding obligations).
    Originally posted by always_sunny
    You're mixing up exchange deposit with mortgage deposit.
    -> Exchange deposit is what is paid in cash / passing deposit up the chain at the point of exchange, typically 10%. If the buyer fails to complete, they lose this exchange deposit.

    ->Mortgage deposit is purchase price minus mortgage amount, ie the equity you have in the house on purchase. This can come from cash savings or equity in your sale.

    The OP's buyer likely has equity in their current home which they will get in cash when they sell (complete) and use this to pay for the purchase. However they don't have spare cash to pay / top up the exchange deposit to the full 10%. However if they only pay 2% on exchange, they can still afford the remaining 98% using the mortgage and equity upon completion.
    • TBagpuss
    • By TBagpuss 13th Jul 17, 11:45 AM
    • 5,661 Posts
    • 7,414 Thanks
    TBagpuss
    OP, is your buyer selling a property or are they a first time buyer?
    If they are a FTB then I would be a bit more concerned as if they are only able to come up with 2% deposit then it sounds as though they are stretching themself to the absolute limit - where are they expecting to get the rest of the money from? I think it is worth asking your solicitor to push them both on coming up with the funds, and clarifying that their solicitor or conveyancer has got proof of funds for the rest.- presumably they are not gettting a 98% mortgage.

    If they are selling then I would be less worried as in that case it is probably more of a cash flow issue, although still worth asking to solicitor to clarify with theirs.
    • G_M
    • By G_M 13th Jul 17, 12:05 PM
    • 40,188 Posts
    • 45,922 Thanks
    G_M
    They have no excuse for saying they didnt know - in 2017 - and all the Internet access we now have.
    Originally posted by moneyistooshorttomention
    Though judging by some of the daft questions that come up on this forum...........
    • Crashy Time
    • By Crashy Time 13th Jul 17, 12:17 PM
    • 4,413 Posts
    • 2,028 Thanks
    Crashy Time
    Was it overpriced? I find it hard to believe that the market in London is so down that it'd take 2 months!

    Still not sure what the problem is, if [your] buyer has only 2% deposit, how will they get a mortgage? Last time I purchased a property, the % of deposit is only relevant to get financing, the seller will not care as they will get the agreed price (minus their costs).

    Your only option is to find someone who can afford to buy your place. Current buyer doesn't.
    (I assume you have not exchanged as mentioned on the first post, so no one is in any binding obligations).
    Originally posted by always_sunny

    Most people will be taken by surprise when the property bubble finally pops. As always, London leads the way.
    • Yazmina
    • By Yazmina 13th Jul 17, 1:03 PM
    • 81 Posts
    • 19 Thanks
    Yazmina
    The buyer is a FTB. Apparently he has a 95% mortgage so he must have convinced the bank that he has the 5%.

    I saw my solicitor this morning. She has advised that we don't try to top up the deposit with our savings. As there are already alarm bells screaming out loud, if we end up not completing we will lose our savings as well. The solicitor has already emailed the buyer's solicitor again to ask for confirmation of deposit and has said that we cannot proceed without confirmation. The EA believes that the buyer's solicitor previously confirmed a 5% deposit, so the EA will chase the buyer and the buyer's solicitor again.
    • PersianCatLady
    • By PersianCatLady 14th Jul 17, 12:30 AM
    • 319 Posts
    • 307 Thanks
    PersianCatLady
    eh?

    the OP will not exchange on his purchase until such time as his buyer exchanges with him, so the Op is not "giving away" 20k of his own money.

    it does not enable someone else to buy his house. It enables OP to buy the house he wants.

    Granted that having exchanged with his purchaser there is a risk the purchaser will fail to complete, but again, that is why there are solicitors involved in the chain, and they should be kept up to date on what is happening and increased (or deceased) risks arising from the actions of the purchaser.
    Originally posted by 00ec25
    He only has £10,000 for a deposit instead of £30,000.

    If he had a property to sell then the lack of deposit could have been solved when he sold his property.

    As there was no mention of the buyer having a property to sell, I assumed that there wasn't one. Which there isn't.

    If the OP uses £20,000 of her money to top-up the buyer's deposit, there is a chance that she may not be able to recoup that money.
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