Help! Could we lose £27,000?

SpanglyBex

Thanks very much I'll give it a go!

silvercar

danlightbulb wrote:

We don't have any deposit either.

We are selling our house and moving up the ladder. But all the equity we make from selling will be ploughed straight into the new house. Fees and stamp duty will be paid out of the equity from our sale. There is no free cash anywhere amongst this.

Your deposit will be formed from the deposit you receive from your buyers and passed up the chain.

Far, far more house purchases fail because exchange doesn't happen than fail between exchange and completion. Leave exchange until completion day and anyone can walk away and owe nothing. Exchange in advance and everyone has a legal obligation to proceed.

I would guess that less than 0.1% of purchases that have exchanged don't complete. Try and exchange on the day and you risk someone in the chain threatening to pull out if they don't get more money / accept less etc.

If the worst happened and completion didn't happen, after exchange, with no deposit you actually give the buyers a few more days to complete, they then have to pay compensation in the form of your necessary expenses caused by the delay and interest - its all written in the contract. If they don't complete in a few days you take them to court.

If you haven't exchanged they just walk into the sunset without a care.

shelly

danlightbulb wrote: »

We don't have any deposit either.

We are selling our house and moving up the ladder. But all the equity we make from selling will be ploughed straight into the new house. Fees and stamp duty will be paid out of the equity from our sale. There is no free cash anywhere amongst this.

If fees and stamp duty are coming from the equity of your sale, can't a deposit come from there too? Or am I totally wrong in my way of thinking?

owned_by_2_Siamese

Once you get into the realms of £200k properties plus it is normal not to exchange with a 10% deposit. You can use a bank g'tee or more commonly exchange with a lesser deposit - standard contracts for sale include a clause that permits an exchange with less than 10% but with the full amount payable if completion does not occur. Most people will not be able to simply produce unencumbered funds of 20k, 30k or more commonly with house prices so high. Exchange and completion on the same day is courting disaster (trust me) Everyone in the chain has to be realistic. There is an expectation that the compataively lower priced properties in the chain will deliver their deposit - this gets aggreggated up the chain but the gap between actual deposit and the 10% gets bigger as the value of the property increases. Most solicitors take a pragmatic view when the 10% deposit becomes unrealistically large for buyers - even when there is a lot o equity in the sale property (you cant get at it until completion!!!!)

silvercar

deposits normally pass up the chain. So if you sell for £100k and buy for £200k you would receive a £10k deposit from your buyer and pass that upto your seller with £10k of your own money. If you were sharp you would try and get 10% deposit from your buyer and pass 5% to your seller, costing you nothing.

People generally don't get hung up on deposit amounts, as the money cannot be used for anything other than deposits - you cannot go and spend the money, it just sits in your solicitors client account.

prudryden

owned_by_2_Siamese wrote: »

Once you get into the realms of £200k properties plus it is normal not to exchange with a 10% deposit. You can use a bank g'tee or more commonly exchange with a lesser deposit - standard contracts for sale include a clause that permits an exchange with less than 10% but with the full amount payable if completion does not occur. Most people will not be able to simply produce unencumbered funds of 20k, 30k or more commonly with house prices so high. Exchange and completion on the same day is courting disaster (trust me) Everyone in the chain has to be realistic. There is an expectation that the compataively lower priced properties in the chain will deliver their deposit - this gets aggreggated up the chain but the gap between actual deposit and the 10% gets bigger as the value of the property increases. Most solicitors take a pragmatic view when the 10% deposit becomes unrealistically large for buyers - even when there is a lot o equity in the sale property (you cant get at it until completion!!!!)

Correct. Letters of Credit can also be used.