Exchange of contract deposit

soph696

Good morning,

My partner and I need some advice on Exchange of contract deposit as we are first time buyers.

We have agreed a completion date of 27th June 2011 which is 4 months away! We had asked the sellers solicititor if they would take a 5% deposit, to which they refused. As we know the people we are buying off we contacted them to ask why the had refused? To which they answered they new nothing about the offer. We presume now that there solicitior want the 19K (10%) sitting in there bank account??

We are also being pushed to do exchange of contracts now and to had over the deposit? Is this usually to do exchange of contracts so far in advance and if we give them 9K (5%) would we be liable to pay the full 10% if we pulled out because if so I will just offer the 5%?

Thank you
Sophie:mad:

Gwhiz

Everything is negotiable.

Yes the deposit has to be paid at exchange. If the vendors are happy with 5% then let them talk to their solicitor and see if that can be arranged.

Early exchange does protect you both as it's a legal commitment for the completion. You are theoretically only liable, if you pull out, for what was agreed as a deposit. However, you could be sued for damages if you did due to breach of contract,

Why not exchange now and complete earlier - or is June the earliest you can do it?

soph696

Yes, unfortunatley June is the earliest we can do it as we are getting married in May and they also have a chain ?

If we give the seller solicitor 15k will they be earning interest on this? I just feel that they are money grabbing as they did not speak to the sellers about our previous offer?

Thank you

Gwhiz

At current exchange rates I doubt the interest will amount to even £100!

pararct

On exchange the deposit becomes the sellers,the solicitor simply looks after it. Any interest accrued (albeit at a paltry rate as the sol has to keep an account separate from his own for this very purpose) on the sum will be paid to the sellers when the completion statement is drawn up.

It should be a two way street in the negotiation to find common ground. Don't take everything as read from the sellers solicitor.

10% is the usual sum can this can be reduced if the sellers agree.

Jenniefour

And to some extent the sellers are accomodating your timescale around getting married. Exchanging early with a longer date to completion also means, once exchanged, you know you have the property to move into after your wedding. In view of the fact there's a chain above you I would be extremely keen to get exchanged asap - everyone is legally tied in then with much less chance something can go wrong - peace of mind. Keep your eye on your major priorities here - wedding with no worries about where you're going to live vs not exchanged and having that hanging about on your wedding day.

As others have said the interest on the deposit you hand over is not worth bothering about - there are other priorities here that are much more important that £100.

Hope all goes well - wedding and new home!

Richard_Webster

If you only pay 5% on exchange you will still be bound to pay the balance of the 10% if you don't complete in accordance with the contract.

Nobody is going to be getting a lot of interest on the money so frankly I can't see the the point of arguing about it.

I get 0.1% on my client account balances so if I had £18K in my account over 3 months I will get £4.50!

One_Day_Rodney

:exclamati

Don't forget you will probably need to insure the property from the date of exchange (best practice and may be required by your lender).

.

Gwhiz

Richard_Webster wrote: »

If you only pay 5% on exchange you will still be bound to pay the balance of the 10% if you don't complete in accordance with the contract.

Nobody is going to be getting a lot of interest on the money so frankly I can't see the the point of arguing about it.

I get 0.1% on my client account balances so if I had £18K in my account over 3 months I will get £4.50!

Richard, is 10% therefore a "legal" minimum even if you only pay 5%? I was under the impression that if 5% was agreed by all parties then 5% was your exposure. Is this not the case?

timmyt

soph696 wrote: »

Good morning,

My partner and I need some advice on Exchange of contract deposit as we are first time buyers.

We have agreed a completion date of 27th June 2011 which is 4 months away! We had asked the sellers solicititor if they would take a 5% deposit, to which they refused. As we know the people we are buying off we contacted them to ask why the had refused? To which they answered they new nothing about the offer. We presume now that there solicitior want the 19K (10%) sitting in there bank account??

We are also being pushed to do exchange of contracts now and to had over the deposit? Is this usually to do exchange of contracts so far in advance and if we give them 9K (5%) would we be liable to pay the full 10% if we pulled out because if so I will just offer the 5%?

Thank you
Sophie:mad:

10% is usual unless you are getting a 95% mortgage and so have less than 10% available. Sometimes if the seller makes you wait for a long away completion date it is only reasonable that they receive less deposit.

but whatever you pay them, if you pull out after exchnage, you still have to make it up to a 10% at that time, as the minimum you will pay them financially for pulling out

forget interest, there is no such thing anymore, not with the base rate as low as it is.

the oney does not bleong to either party it is held as 'stakeholder' which will mean it goes to the selelr if you default, but back to you if the Seller defaults.

Richard_Webster

Richard, is 10% therefore a "legal" minimum even if you only pay 5%? I was under the impression that if 5% was agreed by all parties then 5% was your exposure. Is this not the case?

The standard contract terms provide that if a "notice to complete" is served the balance of the 10% is then due and payable. A lot of solicitors vary that to say that even without such a notice the balance of the10% is payable on the completion day if you don't complete. So not only would you have to agree the 5% but also would have to get the small print of the contract altered as well. I just can't see a seller's solicitor agreeing to that.