Deposit paid on exchange - what happens when you're in a chain?

louschmoo

Hi,

My husband and I are on the brink of exchanging contracts. We are selling our flat and buying a house, and are in a chain of 4 (1 below, 2 above IYKWIM). Our solicitor (who I am less than impressed with) informed us today - when we are due to exchange tomorrow morning - that we may have to top up our deposit. Our purchasers will be paying a 10% deposit. We had assumed (because our solicitor had not told us otherwise at any point) that this deposit would then become our deposit on our new place. Apparently this may not be the case and we may need to add another 5k to make our deposit up to 5%. Our solicitor is waiting for confirmation from our vendor's solicitor about what is acceptable. We had not been informed this by our solicitor before this afternoon, despite my husband asking for a rough breakdown of what the costs/deposit etc were likely to be. So my first question is, surely this is bad practice on the part of our solicitor? Is it normal for them to give you news like this out of the blue 15 hours before exchange of contracts?

My second question is, what happens to everyone's deposits if someone above us in the chain pulls out after exchange? For example, if the guy at the top of the chain pulls out and the chain collapses, do we all get our deposits back? Or do we all have to wait until a new property is found for the one below to buy?

Sorry if this all seems rather convoluted, we are getting very stressed out and have completely lost faith in our solicitors to do a decent job (but that's a story for another thread). Many thanks for any advice.

tek-monkey

I can't help you I'm afraid, but hope this all gets sorted out for you. I've had so much stress through buying I'm losing my sight! OK, it may not be house related, but its a bit of a coincidence. Got an eye test tomo, bah!


(Can't admit I'm just getting old!)

louschmoo

Thanks tek-monkey. Hope the optician gives you some good news tomorrow

G_M

10% is normal for a deposit. If the property you are buying costs more than the one you are selling, then of course the 10% you need to pay will be more than the 10% you receive!
Often solicitors negotiate a smaller deposit in these situations (say 5 or 8%) but this depends on the vendor of the house you are buying agreeing to a smaller deposit.

Yes, your solicitor could have been more forthcoming in his explanations, but he probobly did say, at some point, that you need to pay 10% on Exchange.

All the properties in the chain will 'Exchange Contracts' at the same time, when everyone is ready and committed.

Noone can legally pull out after Exchange. That is what Exchange means - signing a legally binding contract and exchanging it.

And certainly noone can pull out after 'Completion' (which follows Exchange usually by 3 or 4 weeks) as Completion is the point at which ownership of the property is transferred (ie the sale is complete).

louschmoo

Hi G_M,

Yes, I meant to say pulls out after exchange, not completion, I've edited the post accordingly. I know that it is very unlikely that anyone will pull out after exchange, but I am just wondering what would happen to everyone's deposits if someone above us in the chain did pull out. I know that our deposit would be forfeit if we pulled out, but what would happen to our deposit if someone at the top of the chain pulled out and then the chain collapsed?

About the deposit, we are not expected to pay 10% on exchange. Our solicitor mentioned today that we might have to 'top up' our purchasers deposit to make our deposit up to 5%, not 10. I'm just annoyed they only mentioned it today, as we have definitely not had anything in our correspondence where they have said we would have to do this. Hey ho, hopefully it will get sorted out soon (well it'll have to as we are supposed to exchange tomorrow!)

G_M

OK. It's VERY rare for anyone to pull out after Exchange. I would NOT worry about it.
Having said that, there was a case highlighted on the forum about 4 months ago (see here).
A typical response at the time, from an agent, was "With all my years in the business and having dealt with 1,000's of transactions I have never had a vendor pull out ".

Now please - don't get too scared by that thread!!!!!

louschmoo

Thanks G_M. I'm not worried that people will pull out, just want to know what the consequences would be for us if someone did. That thread was quite interesting and pretty much answered my question, thank you.