Please help! Exchanging contracts and deposits being paid

lookingtobuy

Hi,

I don't know if anyone can help me with this....

Basically we are in the process of buying a property and close to exchange, on the contract it talks about a 10% deposit but we only have 5% which the solicitors know about from us and it's on our mortgage offer etc.

What I am not sure about though is will this effect our vendor when we exchange?

A friend of mine told me that when selling her house a while ago she had to find £10k at the last minute as she thought her buyer had 10% deposit and turned out they only had 5% and as their deposit effectively becomes their vendors deposit there was a shortfall....

This has totally confused me, as far as I can gather our vendors don't have any actual 'cash' as such just equity in their property enabling them to pay deposit, moving fees etc, so what money do they have to pay at exchange? is it our deposit and will the fact we only have 5% potentially be a problem??

Any advice would be great as I am really worrying about this now and the solicitors aren't very forthcoming with info to put my mind at rest!

kingstreet

Your solicitor needs to ensure the other parties in the chain are happy with that level of deposit.

G_M

Typically a 10% 'deposit' is paid at Exchange, with the remaining 90% paid at Completion.

The above 'deposit' is nothing to do with the amount you are borrowing, or the so-called 'deposit' you are providing from your savings (which may be 5%, 20%, 50% or whatever).

However, it is common for buyers to negotiate a lower (Exchange) deposit (say 5%), provided the seller agrees.

Guest101

Your deposit does move up the chain, so your vendors can use it as a deposit on the next property. Hopefully their vendors are happy with the level of deposit

moneyistooshorttomention

I gather, from my solicitor, that its fairly standard practice these days to ask a vendor if they are willing to take less than 10% deposit. Some vendors might - but I don't know how many.

I refused to take less myself from my buyer (though I know they won't have a problem with this, due to the size of the deposit they have available).

I will need my buyers 10% deposit, as doubtless my own vendor will be expecting 10% from me. If I accepted only 5% from my buyer, then I would not have enough "deposit" to hand to pass up the chain to cover me for what my own vendor will probably require. I would then have to stump up my buyers "missing bit" of deposit from my own money, which wouldn't be fair on me or tell my vendor that (because of my own buyers shortfall - rather than anything to do with me) that they would have to accept only 5% from me and I cant see them being happy with that and it might cause me problems with them refusing to sell my next house on to me after all.

Some vendors might not have enough money to hand to be able to "lend" their buyer a missing 5% deposit in effect and might have to find another buyer instead.

What GM says re the size of "lendable at Exchange" deposit not being the same as THE deposit being paid on the house necessarily is true. I fell foul of that myself when I bought my current house. My vendor was demanding the standard 10%, but my own deposit I had saved personally was a lot less than that (I actually only had about a 3% deposit myself). There was much scraping-out of the inner lining of my purse and girding of loins in case I had to take out a loan from somewhere to cover the difference and I managed it by skin of my teeth.

As I understand it, that's how it usually works.

It certainly wouldn't even occur to the average vendor that their buyer might have less than the 10% deposit required, as we all just "know" that at Exchange a 10% deposit will be payable by them and that buyers will know this (even though I personally didn't ..but I was buying in a very unusual way). It didn't occur to me, when selling this house, that anyone might have less than 10% of its cost available (just as well my estate agent realised that buyers might not necessarily know they have to have 10% of the cost of a house to hand at Exchange and found me one with a large enough deposit not to be a problem).

I hope you find a way to resolve this.