Buyer offering only £1,000 deposit at exchange

wolvoman

We are days away from exchange and been hit with the news that our buyer can only provide a £1k deposit at exchange as all their non-mortgage money is tied up until completion happens.

The buyer is using a BTL mortgage to purchase our place, with remaining funds coming from remortgaging their existing property. Both mortgage advances are tied into completion and hence will be released upon completion.

Our vendor on the place we're buying has agreed on a £1,000 deposit, leaving only me in the chain with concerns about it.

I know that the contract can be amended to make the buyer liable for the full 10% if they pull-out, but without the deposit in place, how realistic would it be to actually get this money from the buyers?

G_M

You have a contract. If the buyer does not Complete, you

1) don't hand over the property and
2) sue the pants off him

cannyscot_2

I've just been on a BTL course and this is what they teach you to do to allow you to buy more properties with very little deposit money. I do know one where ther buyer disappeared and they never did get the deposit but my understanding is that this is totally up to your solicitor to manage so ask them how they are managing it.

wolvoman

G_M wrote: »

You have a contract. If the buyer does not Complete, you

1) don't hand over the property and
2) sue the pants off him

Except.
1. If they are only offering £1k as a deposit they don't have much in the way of liquid assets which means chasing them for what they owe will be time consuming and expensive.

2. We would also get sued by our vendors except we have all that money set aside as cash ready for the house purchase, so would be very easy to sue.

maninthestreet

sirghayoor wrote: »

Liquid Assets is great thing for understanding the thing for the people for the understanding.

Eh????????

ValHaller

maninthestreet wrote: »

Eh????????

Substitute 'beer' for 'liquid assets' and I think you will see where he is coming from

Richard_Webster

I know that the contract can be amended to make the buyer liable for the full 10% if they pull-out,

If they are using the Standard Conditions of Sale this is not necessary as the wording already says this. The issue is more about actually getting the money from buyer who may not have any and/or may have disappeared.

If you are buying and selling there is more risk for you because you have a house and if you can't complete your purchase your seller can sue you for the balance of the 10% and get a charging order afainst your house which you can't do to the FTB.

If you are edgy about accepting the small deposit there are deposit guarantee schemes out there where for a few hundred pounds an insurcance company will gauarantee to pay the 10% if the transaction deosn't go through. Ask your solicitor about them.

katejo

Richard_Webster wrote: »

If they are using the Standard Conditions of Sale this is not necessary as the wording already says this. The issue is more about actually getting the money from buyer who may not have any and/or may have disappeared.

If you are buying and selling there is more risk for you because you have a house and if you can't complete your purchase your seller can sue you for the balance of the 10% and get a charging order afainst your house which you can't do to the FTB.

If you are edgy about accepting the small deposit there are deposit guarantee schemes out there where for a few hundred pounds an insurcance company will gauarantee to pay the 10% if the transaction deosn't go through. Ask your solicitor about them.

I would feel very uneasy about this situation. Does your insurance suggestion mean that , in effect, a buy to letter could put 1 K deposits on several properties and pull out of all but one while the unlucky sellers have to rely on this insurance to get their lost deposits back?

Richard_Webster

Quote:
Originally Posted by Richard Webster
If they are using the Standard Conditions of Sale this is not necessary as the wording already says this. The issue is more about actually getting the money from buyer who may not have any and/or may have disappeared.

If you are buying and selling there is more risk for you because you have a house and if you can't complete your purchase your seller can sue you for the balance of the 10% and get a charging order afainst your house which you can't do to the FTB.

If you are edgy about accepting the small deposit there are deposit guarantee schemes out there where for a few hundred pounds an insurcance company will gauarantee to pay the 10% if the transaction deosn't go through. Ask your solicitor about them.

I would feel very uneasy about this situation. Does your insurance suggestion mean that , in effect, a buy to letter could put 1 K deposits on several properties and pull out of all but one while the unlucky sellers have to rely on this insurance to get their lost deposits back?

Even a quite cynical business person wouldn't waste £1,000 per property just for the fun of it.

Nobody wants to go into something expecting to throw away £1,000.

Your worry is more the naive buyer who hasn't done his homework properly and can't come with the money or realises that he can't afford the payments and the property won't let for enough. From his point of view it's when losing £1K is the lesser evil than being committed to the purchase when he might choose not go ahead.. In most cases buyers will want to go ahead, but you have to consider protecting yourself agauinst the exception.

wolvoman

Richard_Webster wrote: »

Even a quite cynical business person wouldn't waste £1,000 per property just for the fun of it.

Nobody wants to go into something expecting to throw away £1,000.

Your worry is more the naive buyer who hasn't done his homework properly and can't come with the money or realises that he can't afford the payments and the property won't let for enough. From his point of view it's when losing £1K is the lesser evil than being committed to the purchase when he might choose not go ahead.. In most cases buyers will want to go ahead, but you have to consider protecting yourself agauinst the exception.

Thanks, that's good info.
My main concern is that we have cash in the bank ready for the move, so we're an easy target for our vendors to recover their 10%.
Our buyers however may not have cash available to easily claim from if we sued them.

My current thinking is to offer our vendors two options - either complete and exchange on the same day (hence the 10% is irrelevant), or to insist the 10% clause is removed from our contract with our vendors.
Either way, I suspect they will pull out and end the chain.

Pretty miffed with the buyers. It seems being up front was too much for them.

dotdash79

Or get them to put up the £1k deposit and also pay for the insurance to cover the 10%