Buyers have given 10 percent deposit to their solicitor - don't know why?

Propertyfan

The buyers of my property are cash only buyers - they have no need for a mortgage. Today I was told their solicitor has received funds for the 10 percent deposit.

What deposit is this? I have no idea what this means. Is this to do with them needing a mortgage after all?

I thought funds were put in place *after* exchange of contracts. Anyone shed any light on this? My solicitor is no longer in his office so I can't get his reply.

Flugelhorn

Good sign that things are moving on!


Deposit (usually 10%) has to be in place with the solicitors at exchange of contracts.

I have been a cash buyer and had to do one transfer for exchange then the rest at completion. Happens whether or not they need a mortgage

jimmy_81

As I'm going through the buying process right now I actually can answer this!

The 10% deposit is normally taken at the point of exchange - so presumably you're just about to exchange? This is basically a commitment to back up the exchange of contracts; after exchange they'll forfeit the deposit if they walk away.

So nothing to worry about, all sounds fine!

Propertyfan

Thanks for the information. You learn something new every day.

The exchange date hasn't been determined, I'm still waiting for the searches to be done so what you're telling me suggests the process is moving ahead. Thanks.

Richard_Webster

You wouldn't like it if they exchanged contracts and didn't put down a reasonable sized deposit. OK they are legally bound to complete, but suppose they decide not go ahead and disappear.

You could sue them but if you can't find them or they have no money what good will that do you?

So the purpose of the deposit paid on exchange of contracts is to make it much less likely that the buyer will pull out because he will have something to lose if he does.

G_M

You are confused by the meaning of the word "deposit".

Not surprising.

There are two different meanings relating to house buying:

1) where there is a mortgage, the 'deposit' is that amount of money the buyer is contributing from their own savings(ie purchase price less mortgage)

2) At Exchange of Contracts, a 'deposit' (usually 10%) is paidby the buyer tothe seller (or his solicitor) as an advance on the purchase price.

2) above has NOTHING to do with 1) above!

ValHaller

G_M wrote: »

There are two different meanings relating to house buying:

1) where there is a mortgage, the 'deposit' is that amount of money the buyer is contributing from their own savings(ie purchase price less mortgage)

I much prefer the term 'equity' for this one.

G_M

ValHaller wrote: »

I much prefer the term 'equity' for this one.

Makes sense.

Now... just to persuade all the IFAs, mortgage employees, lawyers, estate agents.... etc.... etc .... to follow yourlead!

:beer:

Richard_Webster

Quote:
Originally Posted by ValHaller View Post
I much prefer the term 'equity' for this one.
Makes sense.

Now... just to persuade all the IFAs, mortgage employees, lawyers, estate agents.... etc.... etc .... to follow yourlead!

I never use deposit in the first sense G_M mentions - but to try to avoid confusion, I put the word "exchange" before "deposit". I would talk about the "difference" between the purcahse price and the mortgage advance.

I've had quite well educated people asking why I wanted the 10% thinking this was to be provided as well as the money they thought they were paying to their building society!

moneyistooshorttomention

A thing I recall from last time I bought a house was that I wasn't told by my solicitor at the outset that I would need to make 10% of the purchase price of the house available at Exchange time. That caused more than a little alarm and disruption when I duly subsequently got asked by him for this money (as I hadn't expected that at all). I managed to deal with the situation, but it was a bit "skin of teeth" (as I didn't actually have 10% deposit myself).

Fast forward to my current purchase and I went to see the legal executive I got this time round. I went to see the legal exec. to get the "legal stuff" officially started off. I was all organised and took everything necessary with me. I was a sight more organised than the legal exec. in the event. I STILL didn't get told I would need to provide that 10% at Exchange...never mind getting told that, as a second-time buyer, this deposit would be provided by my own buyer and would just "travel up the chain". Fortunately, I knew these things myself this time round. But I am a bit shocked that solicitors and legal executives (and presumably conveyancers too) are STILL not telling people this very important fact when we first commission them. Just how are we supposed to know?

If someone hasn't been through a house purchase before or found out whats what from a forum like this, then there is a very good chance they wont know about that fact.

We've only seen a recent thread on here from a FTB with just 5% actual deposit, wondering what was going on on when they were asked subsequently for 10% at Exchange. I seem to recall that some of the advice they were given was to ask their vendor if they would accept only 5% at Exchange and we don't know if that was what happened.

I had a request through from my buyers direction to accept 5% at Exchange and refused it. That was just as well as, in the event, my own vendor was duly asking for the standard 10% themselves (as I anticipated they would). If I had accepted 5% from my own buyer then I wouldn't have had enough "deposit" available to pass up the chain to my own vendor.

Flugelhorn

Had similar thing with some relatives who were buying a house that cost slightly less than the one they were selling (having lived in the first for 35 years) - they assumed that that would be it and wouldn't have to stump up any more cash... the request for the deposit prior to exchange caused some problems and some rapid raiding of my account