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  • FIRST POST
    • Yazmina
    • By Yazmina 13th Jul 17, 12:13 AM
    • 110Posts
    • 27Thanks
    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 2
    • Crashy Time
    • By Crashy Time 14th Jul 17, 10:57 AM
    • 5,230 Posts
    • 2,209 Thanks
    Crashy Time
    Find another buyer?
    • Alexland
    • By Alexland 15th Jul 17, 12:01 AM
    • 672 Posts
    • 422 Thanks
    Alexland
    If a first time buyer genuinely has a 5% deposit then I don't see why he cannot provide it. An alternative approach you may wish to discuss with your solicitor is for the chain to exchange and complete on the same day which we once did and so didn't require a deposit to be passed up the chain.
    • PersianCatLady
    • By PersianCatLady 15th Jul 17, 12:43 AM
    • 339 Posts
    • 320 Thanks
    PersianCatLady
    If a first time buyer genuinely has a 5% deposit then I don't see why he cannot provide it. An alternative approach you may wish to discuss with your solicitor is for the chain to exchange and complete on the same day which we once did and so didn't require a deposit to be passed up the chain.
    Originally posted by Alexland
    It all sounds rather dodgy doesn't it?
    • eddddy
    • By eddddy 15th Jul 17, 8:36 AM
    • 5,429 Posts
    • 5,095 Thanks
    eddddy
    It all sounds rather dodgy doesn't it?
    Originally posted by PersianCatLady
    Dodgy in what sense? Illegal, immoral, high risk?

    TBH, the big problem with exchange and completion on the same day is the uncertainty. You can never be sure if/when it will happen.

    Most people want to book removal vans, book a day off work, maybe arrange childcare etc in advance. That's difficult if you exchange and complete on the same day.

    And if you have a flaky FTB who may or may not be able to raise the cash, it's even more uncertain.
    • PField
    • By PField 15th Jul 17, 9:36 AM
    • 88 Posts
    • 64 Thanks
    PField
    People used to buy houses with 100% mortgages and no deposit. How did that use to work?
    • jimbog
    • By jimbog 15th Jul 17, 9:43 AM
    • 615 Posts
    • 979 Thanks
    jimbog
    People used to buy houses with 100% mortgages and no deposit. How did that use to work?
    Originally posted by PField
    This discussion relates to deposit on exchange rather than a deposit to secure a mortgage
    The problem with quotations on the internet is that you can never verify their authenticity - Abraham Lincoln
    • eddddy
    • By eddddy 15th Jul 17, 9:44 AM
    • 5,429 Posts
    • 5,095 Thanks
    eddddy
    People used to buy houses with 100% mortgages and no deposit. How did that use to work?
    Originally posted by PField
    That was safer because the buyer had a firm mortgage offer for 100% of the funds - so it was a pretty safe bet that 100% of the funds would be available for completion. (So maybe you'd risk accepting a smaller deposit at exchange.)

    In the OP's case...

    The buyer currently has a firm mortgage offer for 95% plus 2% in cash, and hopes to save up the remaining 3% in time for completion.

    What if the buyer can't save up that last 3% in time?

    (If that happens, the bottom line may be that the FTB couldn't complete and would face massive damages claims. So the FTB might go bankrupt, and leave the OP massively out of pocket.)
    Last edited by eddddy; 15-07-2017 at 9:58 AM.
    • AnotherJoe
    • By AnotherJoe 15th Jul 17, 10:02 AM
    • 7,595 Posts
    • 8,195 Thanks
    AnotherJoe
    I think eddddy has it, this is a FTB buying at the limits of their affordability and it could easily go horribly wrong. I'd either want a same day exchange/complete, or find a new buyer, because risk to the OP is very high if the FTB screws up, which is quite likely given they don't have the basic finance in place at the time they need it when it's clear they should have it.
    • Yazmina
    • By Yazmina 15th Jul 17, 11:08 AM
    • 110 Posts
    • 27 Thanks
    Yazmina
    I think eddddy has it, this is a FTB buying at the limits of their affordability and it could easily go horribly wrong. I'd either want a same day exchange/complete, or find a new buyer, because risk to the OP is very high if the FTB screws up, which is quite likely given they don't have the basic finance in place at the time they need it when it's clear they should have it.
    Originally posted by AnotherJoe
    The buyer's solicitor has said that the buyer is waiting on his monthly salary to be able to complete. He's asked for exchange on 28th July and completion on 28th August. It sounds like he doesn't understand the process and we wants to make up for the shortfall in his deposit when he gets paid at the end of August.

    My solicitor and the EA have applied pressure to the buyer's solicitor, so I should know one way or another next week. Today I'm going to tidy the flat in case I need to start viewings again 😔.
    • G_M
    • By G_M 15th Jul 17, 11:19 AM
    • 41,937 Posts
    • 48,546 Thanks
    G_M
    He's so financially stretched that he should not be buying. If it was HE on the forum seeking advice, we'd be telling him to pull out.

    So my advice to you is, pull out.
    • eddddy
    • By eddddy 15th Jul 17, 12:12 PM
    • 5,429 Posts
    • 5,095 Thanks
    eddddy
    The risk to you will be much smaller if you delay exchange until he has a 5% deposit in cash saved up.

    Then the solicitor will be holding 5% and the mortgage lender will be providing the other 95% - so there is much less risk of the buyer failing to complete.


    BUT... mortgage lenders sometimes do last minute credit checks before releasing funds - and have the right to change their minds.

    So if the FTB does something daft, like raising funds through payday loans to pay the deposit, that might spook the lender into changing their mind about lending.
    • eddddy
    • By eddddy 15th Jul 17, 12:18 PM
    • 5,429 Posts
    • 5,095 Thanks
    eddddy
    The buyer's solicitor has said that the buyer is waiting on his monthly salary to be able to complete. He's asked for exchange on 28th July and completion on 28th August. It sounds like he doesn't understand the process and we wants to make up for the shortfall in his deposit when he gets paid at the end of August.
    Originally posted by Yazmina
    It's not really a matter of not understanding the process.

    If you were 100% sure that he would get his monthly salary and have the money to complete - that's fine, you can use your savings for your deposit and go ahead.

    The risk is that the FTB is deluded or over optimistic (or lying) and won't have the money to complete.

    You could then be tens of thousands out of pocket.
    • Crashy Time
    • By Crashy Time 15th Jul 17, 12:43 PM
    • 5,230 Posts
    • 2,209 Thanks
    Crashy Time
    People used to buy houses with 100% mortgages and no deposit. How did that use to work?
    Originally posted by PField

    Worked out great....for the bankers....not so great if you are trying to sell now, because the bubble that sort of lending caused has started to pop.
    • Yazmina
    • By Yazmina 15th Jul 17, 1:07 PM
    • 110 Posts
    • 27 Thanks
    Yazmina
    I think he must have the full 5% otherwise how would he have got a 95% mortgage?
    • AnotherJoe
    • By AnotherJoe 15th Jul 17, 1:47 PM
    • 7,595 Posts
    • 8,195 Thanks
    AnotherJoe
    I think he must have the full 5% otherwise how would he have got a 95% mortgage?
    Originally posted by Yazmina
    Good question. Do the lenders ask to see evidence of your deposit? If the FTB did have it and now doesn't that says even more how much they are doing this on a wing and a prayer.
    • Thrugelmir
    • By Thrugelmir 15th Jul 17, 2:36 PM
    • 55,891 Posts
    • 49,262 Thanks
    Thrugelmir
    I think he must have the full 5% otherwise how would he have got a 95% mortgage?
    Originally posted by Yazmina
    If the buyers solicitor is unable to exchange due to lack of deposit. Then the mortgage cannot be drawn down.
    Last edited by Thrugelmir; 15-07-2017 at 2:58 PM.
    "Wide diversification is only required when investors do not understand what they are doing." - Warren Buffett
    • mrschaucer
    • By mrschaucer 15th Jul 17, 5:28 PM
    • 464 Posts
    • 496 Thanks
    mrschaucer
    Even if he HAS got a 5% deposit, the OP is still going to have to subsidise him temporarily (one hopes) by using her savings to top up the monies she will receive on exchange (5% of the value of her house) to 10% of the value of the house she's buying (as her vendor wants a 10% deposit). Normally the difference in vendor/buyer deposits both at 10% would be manageable if one has planned for it, but to suddenly have to find more because the buyer can only manage 5% would be impossible for some people. It's ok if everyone in the chain agrees to 5% (but still risky if a flaky FTB is buying from you as you'd have to sue them for the remaining deposit if things went pear-shaped, and they might not have it) but I certainly wouldn't like to be a 5% "receiver" and a 10% "giver", even if I could afford it! And the idea of exchange/completion on the same day gives me the horrors. What a rotten position for the OP.
    • alchemist.1
    • By alchemist.1 15th Jul 17, 7:40 PM
    • 851 Posts
    • 656 Thanks
    alchemist.1
    Good question. Do the lenders ask to see evidence of your deposit? If the FTB did have it and now doesn't that says even more how much they are doing this on a wing and a prayer.
    Originally posted by AnotherJoe
    They do and Estate agents do aswell. A lot of solicitors will also ask for confirmation.

    So this does leave alarm bells ringing.
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