questions about exchange, completion and deposit with chains

sddxac

eddddy wrote: »

No - if my description is correct, it is not risky. Completing a sale and purchase simultaneously is usual.

But you normally exchange contracts on sale and purchase simultaneously as well - so you are guaranteed to have somewhere to live!

In your situation, the big risk is that the person selling the house cannot (or will not) complete that quickly. Then you will be homeless.

The house is empty for a few months now. The seller has his own house to live. You mean I should not worry about failed to completion on time then?

Old_Git

your plan to sell and buy on the same day is normal .
Using the deposit from the sale of your flat is also normal .
Just make sure you are the last to sign the paperwork .
Then your buyer and seller are committed to sell

G_M

It is usual to Exchange on both purchase and sale simultaneously, with Completion dates for each being the same.

This is the ONLY way to guarantee that both deals will go ahead.

If you Exchange on one before the other there is always a chance (and not just a small chance) that the other deal will not go through, or may be delayed, perhaps considerably.

At least in this case you have Excanged on your sale first, so if the purchase slips or fails, you will not be bankrupt - just homeless.

Had you exchanged on the purchase first, and the sale slipped, you would have been unable to pay for the purchase when contractually obligated to, and then.... bankruptcy!

I'm amazed your solicitor did not adise you to do both ogether. Does he know you are buying and selling? Or (god forbid given your apparent lack of understanding) are you doing the conveyancing yourself????

eddddy

sddxac wrote: »

The house is empty for a few months now. The seller has his own house to live. You mean I should not worry about failed to completion on time then?

No - you should not worry about your buyer failing to complete on time. The risk is so small you can effectively ignore it. If you're still worried, ask your solicitor.


But if your buyer does fail to complete, you will have to pay your sellers losses, but you will claim these back from your buyer - so you will not lose any money. (But it is about 99.999% certain that this will not happen.)

franklee

eddddy wrote: »

No - you should not worry about your buyer failing to complete on time. The risk is so small you can effectively ignore it. If you're still worried, ask your solicitor.


But if your buyer does fail to complete, you will have to pay your sellers losses, but you will claim these back from your buyer - so you will not lose any money. (But it is about 99.999% certain that this will not happen.)

Presumably no one would fail to complete after exchange unless something serious had gone wrong but you make rather a sweeping statement that the OP won't lose any money. How do you know a buyer who pulls out can afford to pay all losses should the worst happen? The OP's (or the vendor's) solicitor will be holding the buyer's deposit but that may not be enough if the defaulting buyer was buying a cheaper property than the one the OP is buying. That would leave a shortfall that can be sued over and there's a huge difference to being entitled to compensation in law and actually getting hold of the cash. So although we hope unlikely to happen to the OP it is a risk when buying in a chain.

Landofwood

kingstreet wrote: »

The cash deposit of the first buyer in the chain passes up the chain becoming a smaller percentage of the higher purchase prices as it goes.

Homeowners don't have to come up with cash if their home contains the equity which will become their "deposit."

Your solicitor will negotiate this with the other chain member solicitors.

This is inaccurate.

Buyers are generally expected to contribute the full 10% at Exchange, which normally consists of preceding buyer's deposit plus cash.

If you not have the cash, your solicitor has 2 options:

1. Negotiate with the seller to accept a smaller deposit. They will probably say yes at this stage, but there is a small chance they could say no.

2. 'Simultaneous' exchange and completion. Again, other member's in the chain will probably agree at this stage, but they could say no.

kingstreet

Landofwood wrote: »

This is inaccurate.

Buyers are generally expected to contribute the full 10% at Exchange, which normally consists of preceding buyer's deposit plus cash.

If you not have the cash, your solicitor has 2 options:

1. Negotiate with the seller to accept a smaller deposit. They will probably say yes at this stage, but there is a small chance they could say no.

2. 'Simultaneous' exchange and completion. Again, other member's in the chain will probably agree at this stage, but they could say no.

Interestingly, you've decided my post was inaccurate, then you've gone on to explain how it's both accurate and possible.

That's consistent... :eek:

sddxac

G_M wrote: »

It is usual to Exchange on both purchase and sale simultaneously, with Completion dates for each being the same.

This is the ONLY way to guarantee that both deals will go ahead.

If you Exchange on one before the other there is always a chance (and not just a small chance) that the other deal will not go through, or may be delayed, perhaps considerably.

At least in this case you have Excanged on your sale first, so if the purchase slips or fails, you will not be bankrupt - just homeless.

Had you exchanged on the purchase first, and the sale slipped, you would have been unable to pay for the purchase when contractually obligated to, and then.... bankruptcy!

I'm amazed your solicitor did not adise you to do both ogether. Does he know you are buying and selling? Or (god forbid given your apparent lack of understanding) are you doing the conveyancing yourself????

I was planning to sell flat first, rent for short term and buy a new house originally. But selling flat took me 4 month, during which I have got the house to buy. And now it is ready to exchange too. So I want to let them complete at the same time now.

sddxac

franklee wrote: »

Presumably no one would fail to complete after exchange unless something serious had gone wrong but you make rather a sweeping statement that the OP won't lose any money. How do you know a buyer who pulls out can afford to pay all losses should the worst happen? The OP's (or the vendor's) solicitor will be holding the buyer's deposit but that may not be enough if the defaulting buyer was buying a cheaper property than the one the OP is buying. That would leave a shortfall that can be sued over and there's a huge difference to being entitled to compensation in law and actually getting hold of the cash. So although we hope unlikely to happen to the OP it is a risk when buying in a chain.

This is what I worried. The deposit for my flat selling is more than the low deposit for the house buying, but it is less than the 10% of the house value. So even if I pay a lower deposit, I am still liable for 10% in case of any failure anywhere in the chain?

sddxac

eddddy wrote: »

No - you should not worry about your buyer failing to complete on time. The risk is so small you can effectively ignore it. If you're still worried, ask your solicitor.


But if your buyer does fail to complete, you will have to pay your sellers losses, but you will claim these back from your buyer - so you will not lose any money. (But it is about 99.999% certain that this will not happen.)

Good to hear that risk is minimum. My mortgage is approved and I used this bank before, not having a problem in the past. But I don't know about buyer side. I am also worried about delaying by any reason, e.g. bank transfer etc.

I always like to be prepared for worse case, at least know what will happen hence seek advice here. I will of course discuss with my solicitor tmr too.

Really appreciate that so many ppl have replied and give good advice!