Non-refundable deposit before contract

Nicki

Those who have advised you already are confusing the deposit which is paid on exchange of contracts with a pre-contract "holding" deposit which is paid to show an offeror is serious and not exaggerating their ability to proceed.

The reason he can't show you the contract first is because otherwise he cannot then bring in a new buyer if you are slow to do what you say you can do without telling all the parties they are in a contract race which will slow things down.

If you are genuine in wanting to buy the property, and in being able to proceed quickly, then there is no problem with this. It will prevent you from being gazumped but will also prevent you from gazundering.

Having been messed around by buyers who have lied about their true positions for months now, I can completely see where your seller is coming from. If I were buying a property now I would offer such a deposit and I won't consider an offer on the one I am selling without one.

rjm2k1

If you do this, make sure the vendor pays the same amount into deposit himself to prevent him from pulling out too, this should be held by the solicitor and only once both parties have coughed up the deposit does it become non-returnable in the event of one pulling out (in which case the other party gets both deposits).

Nicki, you say this prevents them from being gazumped, yet in the same post suggest that if they take too long the seller can bring in another buyer, what's the difference?

OP suggests that the contract is ready and available, if this is the case and all other paperwork has been completed then there's no reason to hold the contract, just exchange and pay the usual deposit.

Nicki

rjm2k1 wrote: »

Nicki, you say this prevents them from being gazumped, yet in the same post suggest that if they take too long the seller can bring in another buyer, what's the difference?

Because you are committing by paying the deposit to exchanging and completing within a set time frame. That's the point as far as the buyer is concerned. Buyer can't sell to someone else during that period because he is contractually bound to sell to you (if your solicitor has worded the contract properly). If during that period you are ready to exchange, buyer must do so. If you aren't, the minute the period expires, the buyer is free to bring in another buyer.

In effect you are buying an exclusivity period.

Elizabeth_739

We appreciate your comments and advice - in fact as our solicitor was not happy with the situation and we are expecting to exchange contracts on our own property very soon, we have decided to sit tight with our offer still on the table. Once we have exchanged on our own, we will reiterate our full price offer and are willing to proceed in the normal way of purchase. What we will not do is be held to ransome by the vendor - a legal contract needs to be on a level playing field!

Elizabeth_739

I will also add that losing this house will give us a lot of hassle - needing to find alternative accomodation and contents going into store etc. so not an easy decision!

rjm2k1

Elizabeth_739 wrote: »

I will also add that losing this house will give us a lot of hassle - needing to find alternative accomodation and contents going into store etc. so not an easy decision!

Good for you, I also would refuse to be held to ransom like this, buyng a house is a complex process with many pitfalls, should the survey or searches dig something up you wouldn't want to lose your deposit as it's not your problem. For such a deal to be fair, the vendor surely must put up a matching deposit in case it falls through from their side.

Richard_Webster

If you are going to pay over £5,000 then there has to be some kind of agreement that says the circumstances in which it will or will not be refunded, e.g. the seller pulls out it should be refunded. So they have to have a contract of sorts for that purpose and your solicitor can argue about its terms. If you don't have anything that stipulates the conditions in which the money will be either forfeited to the seller or returned then you have a problem anyway and it would be foolish to hand over the money.

If I am acting for a seller I usually point out that whilst it may be a good idea to encourage seriousness on the part of the buyer, there is the potential to waste time on arguments about the nature of this separate agreement, rather than concentrating on the main work of getting the sale through!

As a conveyancing solicitor I believe the information given in the post to be useful but I accept no liability except to fee-paying clients

Elizabeth_739

To conclude this epistle: After a lengthy phone call from the purchaser expressing his concern about a sale falling through once he left the country, we knew he was about to withdraw from the market. OK we know he's mad as no-one else will come along and give him £5000 upfront!!! but as we had said we wouldn't pay £1000 for fixtures and fittings, my partner and I agreed that we would 'risk' this £1000 to show good faith. He then came back to say he would accept £2000 !!! Our solicitor tried to negate all conditions and clauses regarding time limits etc. as we cannot guarantee the actual date of our exchange. The vendor has again said we must exchange before the end of August and thereafter the price goes up plus we will lose our deposit. We have now called it a day after trying very hard to agree to come to a reasonable conclusion. We would never ever even get into discussions again if anyone wanted something different from the norm. We're lucky to be able to walk away!!! It will be interesting to see how long the house stands empty.

Thanks to everyone for their comments - for those that think a deposit is acceptable, perhaps you have been lucky in your own dealings.

Melissa177

The guy is a nutter - but it sounds like you have your head screwed on!

Good luck with the house hunt.

rjm2k1

Well done, this guy is a nutter and would have held you over a barrel at every opportunity. When he comes running back, offer him less, on your terms!