Deposit in chain goes to top of chain??

rose28454

My daughter and bf are buying a house having sold his flat. There is a chain of 3 people ( they are at the bottom) and the top person is buying a new build. Solicitor emailed bf other day and said that when he pays over his deposit ( £38000.00 ) it will go all the way up the chain and will actually pay the deposit on the new build. She said something about if the builder goes bust then he could lose his deposit. Does this sound correct??

somethingcorporate

Sounds like misinformation/miscommunication/poor understanding.

Double check with the solicitor, that is what they are being paid for.

rose28454

somethingcorporate wrote: »

Sounds like misinformation/miscommunication/poor understanding.

Double check with the solicitor, that is what they are being paid for.

She emailed him and said that if the builder went bust he would lose his deposit and the builders insurance would only cover deposits up to 10% and then he would possible have to wait some time to get it back. It is Crest Nicholson who are a large company but I realise this does not make a difference. The house DD and BF are buying is £170000. so deposit should be 17000 and that will move up the chain. But I dont see how that would work if the house at the top is £250000 ( which is approx the price of the houses on the new development) then surely the deposit needs to be £25000.00. I am just trying to get my head around it as DD and BF are young and I am not so trusting as they are. Yes and I take on board what you mean about the solicitor. I will ask BF to send me on the email he got from her

Belindav123

Surely the person who would lose the deposit is the person buying the new build only.?? seems strange

pinkteapot

Just to clarify one point, you're slightly confused between two separate deposits.

On exchange, they'll pay their 10% (£17k).

In your first post, you mentioned a figure of £38k. I assume this is because they have more than 10% to put down (i.e. their mortgage is less than 90%). They won't give their solicitor the remaining £19k until a few days before completion, and your solicitor won't send it up the chain until the morning of completion.

In short, they pay 10% at completion (£17k) and the rest (a combination of money from them and the mortgage company) on completion.

Regarding the amount to pass up the chain, there was a thread about this yesterday, but I can't find it now, argh!

In some chains, all parties are happy just to receive the deposit that came in at the bottom (so £17k passes up and the people at the to are paying less than 10% on exchange and more later). In others, people are asked to 'top it up' to take their deposit to the full 10% for their purchase. It's up to the people and solicitors in the chain to agree what to do.

I've not heard about this point re builder going bust before. It is true that deposit monies pass up the chain from one solicitor to the next, but I thought that at the top of the chain the money sat with the solicitor, rather than going to the top vendor's bank account. I didn't think that vendors received any cash due until completion, but might well be wrong.

How big is the building company? I suspect this is a warning that solicitors are obliged to give out if builders are involved, but if the chance of them going bust is very slim I wouldn't worry too much. If it concerns them then they could push for a short gap between exchange and completion, but this isn't fun for anyone in the chain.

rose28454

pinkteapot wrote: »

Just to clarify one point, you're slightly confused between two separate deposits.

On exchange, they'll pay their 10% (£17k).

In your first post, you mentioned a figure of £38k. I assume this is because they have more than 10% to put down (i.e. their mortgage is less than 90%). They won't give their solicitor the remaining £19k until a few days before completion, and your solicitor won't send it up the chain until the morning of completion.

In short, they pay 10% at completion (£17k) and the rest (a combination of money from them and the mortgage company) on completion.

Regarding the amount to pass up the chain, there was a thread about this yesterday, but I can't find it now, argh!

In some chains, all parties are happy just to receive the deposit that came in at the bottom (so £17k passes up and the people at the to are paying less than 10% on exchange and more later). In others, people are asked to 'top it up' to take their deposit to the full 10% for their purchase. It's up to the people and solicitors in the chain to agree what to do.

I've not heard about this point re builder going bust before. It is true that deposit monies pass up the chain from one solicitor to the next, but I thought that at the top of the chain the money sat with the solicitor, rather than going to the top vendor's bank account. I didn't think that vendors received any cash due until completion, but might well be wrong.

How big is the building company? I suspect this is a warning that solicitors are obliged to give out if builders are involved, but if the chance of them going bust is very slim I wouldn't worry too much. If it concerns them then they could push for a short gap between exchange and completion, but this isn't fun for anyone in the chain.

It is crest nicholson ( who are a large company). I think you ,ay be right about a standard warning re builders. Regarding short gap between exchange and completion DD AND BF would like that as they made offer on the house in May and expected to be in by now. Selling Estate agent is also agent for new build and it was only a few weeks ago when completion was due on the flat bf sold that it came to light that it was not house vendor ( that dd and bf are buying from) that was buying the new house but the people they are buying from. Estate agents have been quite rude and DD ( who gets very anxious) now lets bf and solicitor deal with them as she said she will let rip otherwise. BF had to be out of his flat at end of August so has moved in with DD and I and I would like it settled asap as I am about to start a new business and want to reorganise my house. It would also be nice if they could be in before winter.

pinkteapot

Crest Nicholson are a FTSE 250 company and have been going since 1963, so I think you'll be fine. Have a look at the email but I expect it's part of a standard set of warnings. If it was a small, local builder, it might be something to be slightly concerned about, but I think the chances of anything to happening to Crest Nicholson in the couple of weeks between exchange and completion are pretty remote.

Focus on the things you have some degree of influence over - getting the chain to exchange contracts. You can breathe a lot easier once you've exchanged as until then there are no guarantees of it happening at all. Keep bugging the EA and solicitors and find out what is outstanding in the chain before contracts can be exchanged.

kingstreet

If completion doesn't take place, you are suing the next person along in the chain.

The only one who would have a real issue is the one buying from the builder.

rose28454

kingstreet wrote: »

If completion doesn't take place, you are suing the next person along in the chain.

The only one who would have a real issue is the one buying from the builder.

Thats not the impression the solicitor gave him. However just spoke to BF's Dad when he came to pick up their dog and he is of the sme mind as me that it seems odd.

rose28454

pinkteapot wrote: »

Crest Nicholson are a FTSE 250 company and have been going since 1963, so I think you'll be fine. Have a look at the email but I expect it's part of a standard set of warnings. If it was a small, local builder, it might be something to be slightly concerned about, but I think the chances of anything to happening to Crest Nicholson in the couple of weeks between exchange and completion are pretty remote.

Focus on the things you have some degree of influence over - getting the chain to exchange contracts. You can breathe a lot easier once you've exchanged as until then there are no guarantees of it happening at all. Keep bugging the EA and solicitors and find out what is outstanding in the chain before contracts can be exchanged.

Yes i will tell them to keep the pressure up. Also I think it is a good idea for them to press for short space between exchange and completion

jbainbridge

I thought money stayed with the solicitor until completion? So the deposit would be passed up the chain to the developer's solicitor who would then hold it (safely) until completion.

Anyone?