Vendor paying a 5% deposit

ladela

My friend is trying to sell her house. It was valued by the EA at £120,000 - my friend wants a quick sale so put it up at £110,000. Shes also looking at paying the buyers deposit (5% of the £110k) - is there any pitfalls in doing this? There are a lot of houses on the market in her area at a similar price to hers (her house is immaculate) and she thought paying the 5% might entice first time buyers and make it stand out to the rest.

Does anybody have any experience of this and know any problems which can arise if she does this?

Thanks

GAH

IF I was your friend, it stead of complicating the matter, I would just drop the 5% off the asking price, its much simpler and less confusing.

ladela

Thanks for your post

She already has dropped it from £120k to £110k - she just thought paying the deposit might open it up to FTBs who have no deposit or doesn't it work like that? Years ago when i was buying lots of (private) property ads had '5% deposit paid' - buts its not so common now, I just wondered why?

kingstreet

It's less common now because only Halifax accepts vendor gifted deposit business. It could be useful in helping a buyer get below 80% if they have a 15% deposit, but Halifax products aren't that great at the moment so they might feel they could do better with a wider choice of mortgage lenders.

The house also has to value up. Any downvaluation could see your friend being asked for another 5% off if it's (eg) valued at only £100k.

ladela

ahhh right - I'll let her know. Thanks for that.

scottishblondie

My friends just bought with a vendor gifted deposit, but they only went with that because they were already getting a mortgage from the Halifax and they were able to get a better LTV because of it. If that had not been the case they would have wanted the 5% taken off the price.

As a rule, I'd say knocking 5% off the price is much more likely to attract attention, and is a lot less complicated!

brit1234

As a first time buyer I would stay away from gift deposits. I would rather have the money off and not be limited to one mortgage lender.

chambta

GAH wrote: »

IF I was your friend, it stead of complicating the matter, I would just drop the 5% off the asking price, its much simpler and less confusing.

But of course if people only have 5% of the higher price in cash it won't help. Which is the point of doing it.