What exactly happens on exchange?

Daniel_B

Dumb !!! question, I thought that when you exchanged contracts that your deposit went across to the solicitor of the person whose property you were purchasing.

Then if you pulled out you lost your deposit?

Is this not the case, and if so, what happens, to tie you into the deal?

We are selling, and before I start taking furniture apart, I want to know that the buyer is very unlikely to pull out.

Dan

JennyW_2

contracts are exchanged and deposits paid. Wait until you've exchanged until you start moving furniture out! Your buyer can pull out anytime before exchange but it's quite rare for someone to pull out once you've exchanged.

brownie2

It would cost an arm and a leg for someone to pull out once you have exchanged!

fivepound

How much is the deposit and where does the money come from (me or from the Mortgage company?)

rach29

The deposit is usually 5% of the property value, although sometimes a different figure can be agreed I believe.

It's you who pays the deposit, although again sometimes parties can agree to take a deposit from underlying sale proceeds or If a 100% mtge is in place take no deposit at all I believe.

If someone fails to complete, it all gets horribly complicated & the solicitor would usually give 28 days to fulfil completion during which time interest is payable. If completion doesn't happen during this time then the deposit is lost & the vendors solicitor would also sue down the line for costs etc.

However, this is a VERY rare occurrence. I'm sure one of our legal eagles will be along to confirm this & correct me if I'm wrong about any of this.:)

Daniel_B

Thanks peeps, hoping to exchange soon.

Cheers

Dan

Richard_Webster

one of our legal eagles will be along to confirm this & correct me if I'm wrong about any of this.

Here I am!

Rach29 is broadly right - failure to complete at all is rare - known of 3 or 4 cases in 30+ years in the law
- the period for compliance is usually shorter than 28 days
- and in theory a 10% deposit is supposed to be paid but in practice in a lot of cases the average is nearer 5%.

A first time buyer has to find the deposit - the mortgage money can't be used. If there's no deposit then sometimes exchange and completion take place on the same day.

If you are selling and buying you can usually use your buyer's deposit on your purchase, but if there is a big difference in the prices between your sale and your purchase, you might have to top it up a bit!

As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients.

Debt_Free_Chick

Perhaps Richard Webster will confirm my understanding ...

That the deposit is simply "security" so that your solicitor physically holds the buyer's deposit. If they pull out, you have your "compensation" there and then.

In theory, your solicitor does not need to hold the buyer's deposit - but if they then pulled out, you may have to enter into protracted and expensive legal proceedings to actually get your hands on the money.

The buyer is liable to forfeit an amount equal to the deposit, whether or not the deposit has physically changed hands. Your solicitor holding the deposit means that there is no question on you getting your hands on the money, if the buyer pulls out.

Regards

Richard_Webster

It is security - but you don't get it immediately after a failure to complete on the next day - there is a timescale at the end of which the seller can keep it.

If the seller fails to complete then the buyer can ask for the deposit back - hence the reason the solicitor at the top of a chain holds it as "stakeholder" in most cases.

you may have to enter into protracted and expensive legal proceedings to actually get your hands on the money.

This is basically true. The standard contract actually provides that a 10% deposit is payable in all cases. If completion doesn't take place and the seller serves a "notice to complete" the balance of the 10% not already paid is then payable - but as you have said you have to sue them for it.

The real issue is for the seller to get as much as he can up to 10% (so he he has maximum security) commensurate with not delaying things unreasonably and losing the sale. If the deposit actually offered is really small the seller may be concerned that the buyer will sacrifice the deposit and disappear.

Usually it isn't worth delaying things to get the full 10% just for the sake of it as most people are more concerned to get the transaction proceeding than to waste time waiting for a FTB to borrow a few thousand from his Auntie Maud (assuming he has one!).

As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients.

pknottm

Does anyone know what the seller can claim for if the Completion is delayed by a day?

Unfortunatetly I paid by CHAPS on the day, but the money didn't go through to the seller's solicitor until after 5pm (after he'd gone home), so we didn't complete on the required completion date!

I was then asked for another £255 for additional removal expenses (not interest) from the seller's solicitors before they would allow the keys to be released!!

It was very annoying as the Coventry BS assured me the CHAPS would go through by noon (even though they only guarantee end of working day)
I had arranged it the previous day so it would be one of the first processed on completion day! :mad:


How are house sale proceeds usually transferred up the chain on completion day? Surely if all solicitors in the chain waited for cleared CHAPS funds it would take a day for everyone in the chain?!

Debt_Free_Chick

My understanding is that a CHAPS transfer initiated before noon, will usually be in the recipient's bank account by (no later than) 4pm and often by 2pm. It's pretty much "instant".

I would ask your solicitor to provide evidence as to the time of receipt. If the money did arrive on the day of completion, I'd be asking the solicitor to pay the seller's extra costs.

Another way of getting evidence is to (gently) "complain" to the CBS - tell them the money was not received on the day of completion and I'll bet they'll send the evidence that it was deposited before the end of the day, if indeed it was :rolleyes:

How are house sale proceeds usually transferred up the chain on completion day? Surely if all solicitors in the chain waited for cleared CHAPS funds it would take a day for everyone in the chain?!

Quite! :rolleyes:

HTH