House purchase non refundable deposit?

Angelicdevil

Run away!

At this point in time you don't even know if he's the legal owner of the property.

There are so many thinks that could go wrong, unless you can afford to say goodbye to £5k then don't even consider it.

ognum

G_M wrote: »

Only agree to this if the seller puts in a similar amount - both sums to be held by solicitors.

And you'l need clear, written agreements outlining in what circumstances the money can/can't be refunded.

* your survey finds the house is falling down, so you pull out. You get your cash back? Or not?
* seller gets a higher offer from someone else at last minute. You keep his cash? Or hav to give it back?

This is why in England, no deposits are usually paid, or legal comitments made, till Exchange of Contracts.

It's a legal minefield.

I have done an agreement like this 6 years ago when buying, however, it was a legal agreement with many clauses and get out and the money went into escrow until exchange of contracts.

It was very complicated and had a cost involved for the legal work, I think about £500 but it was a house we wanted and so did others!

Jabberwk

We have just been dealing with a similar situation. In our case we agreed to a £2k deposit to be lodged with our solicitor as a sign of being a serious buyer. This all seemed fine until the vendor's solicitor told our solicitor that they were instructed not to send over the contracts until a 2k non-refundable deposit had been paid to the vendor (not what had been agreed). Our solicitor explained to us very clearly that, while the vendor may be innocently looking for reassurance, what we would actually be agreeing to would be to give them 2k, and they could then just change their mind about selling and walk away with our money. She went so far as to saying that if we agreed to this we would have to sign something to say it was against their advice. She sent an email to their solicitor saying that we could not agree to such uncertainty and pointing out that this was not standard practice and asking whether the deposit would be refunded if, for example, the survey showed up issues or the sale fell through as a result of the seller's actions. The argument went on for 2 days but ultimately the point appears to have been made that no solicitor is going to allow their client to agree to this so the seller needs to be more realistic. Our solicitor also pointed out that we had showed our commitment to the sale by lodging the 2k with them and also paying for a survey and mortgage application fee. They have now agreed to release the contracts on the basis that the deposit is lodged with our solicitor. If the seller does not have a solicitor to argue with, I would recommend speaking to the estate agent and appealing to them to make it clear to the seller that, while some compromise may be reached, no one in their right mind is going to be willing to hand over a non-refundable deposit with no terms and conditions to protect them, and the seller is essentially stabbing themselves in the foot by asking for this (and also preventing the estate agent from getting their fee). You could point out that once you pay for a survey you have already shown financial commitment to the sale, or offer, as we had already done, to lodge a deposit with your solicitor, which, while not accessible by the seller and therefore, to all intents and purposes, meaningless, does show you are at least willing to stump up money up front, and are therefore a bit more committed. The main point to make is that no one with legal advice is going to agree to this, so if they want to sell they need to find a compromise.

ognum

Jabberwk wrote: »

We have just been dealing with a similar situation. In our case we agreed to a £2k deposit to be lodged with our solicitor as a sign of being a serious buyer. This all seemed fine until the vendor's solicitor told our solicitor that they were instructed not to send over the contracts until a 2k non-refundable deposit had been paid to the vendor (not what had been agreed). Our solicitor explained to us very clearly that, while the vendor may be innocently looking for reassurance, what we would actually be agreeing to would be to give them 2k, and they could then just change their mind about selling and walk away with our money. She went so far as to saying that if we agreed to this we would have to sign something to say it was against their advice. She sent an email to their solicitor saying that we could not agree to such uncertainty and pointing out that this was not standard practice and asking whether the deposit would be refunded if, for example, the survey showed up issues or the sale fell through as a result of the seller's actions. The argument went on for 2 days but ultimately the point appears to have been made that no solicitor is going to allow their client to agree to this so the seller needs to be more realistic. Our solicitor also pointed out that we had showed our commitment to the sale by lodging the 2k with them and also paying for a survey and mortgage application fee. They have now agreed to release the contracts on the basis that the deposit is lodged with our solicitor. If the seller does not have a solicitor to argue with, I would recommend speaking to the estate agent and appealing to them to make it clear to the seller that, while some compromise may be reached, no one in their right mind is going to be willing to hand over a non-refundable deposit with no terms and conditions to protect them, and the seller is essentially stabbing themselves in the foot by asking for this (and also preventing the estate agent from getting their fee). You could point out that once you pay for a survey you have already shown financial commitment to the sale, or offer, as we had already done, to lodge a deposit with your solicitor, which, while not accessible by the seller and therefore, to all intents and purposes, meaningless, does show you are at least willing to stump up money up front, and are therefore a bit more committed. The main point to make is that no one with legal advice is going to agree to this, so if they want to sell they need to find a compromise.

We did do this with legal advice. We had something called an Exclusivity Agreement. These are not uncommon, quite legal and the funds are lodged in escrow.

ognum

Google 'Exclusivity Agreement' and you will see they are used in cases like this and prevent gazundering and gazumping.

da_rule

If it is for an exclusivity agreement that's a different matter. From what the OP is saying the vendor just wants the money to 'prove they are serious buyers'. I would still not hand over any money or enter into an agreement without legal advice.

Jabberwk

We would have had no problem with an exclusivity agreement, but our seller was asking for a non-refundable deposit with no other terms attached.