Why does vendor care about my deposit?

beefturnmail

libf wrote: »

If you've shown the EA you can afford more then look forward to them trying to drive your offer up, as they're generally paid a % of the sale price.

This is often said of EAs, but I'm not sure how true this is. Say the EA is paid 1% of the sale. Are they really going to fiddle around trying to get you to up your offer by say £5k, when this only amounts to an extra £50 for them and risks you walking and delaying the sale (and them getting paid anything)?

I would say more often than not, it is the vendor who is trying to push the sale price up. Of course if then is more than one offer on the table (as in this case), then they are in a good position to do this.

looknohands

Yep we're sticking to our price, it's more than the other offer, I just didn't get it really, but fair enough if they want to sell for less!

princeofpounds

There are a number of reasons why this might make it harder to get a mortgage and proceed with the purchase. But probably the most applicable one is a retention.


This is where the mortgage survey (or a legal search of some other piece of data) throws up an issue that makes the house riskier to mortgage.


If it is a problem that can be solved by throwing some money and work at it, a mortgage lender will often demand a retention. This basically means that they keep some of the money back and only agree to lend it out when the problem is fixed. Therefore they reduce their risk if you turn out to be a bad bet and the problem is still there.


If you have a 10% deposit and a 5% retention is demanded, you will find it very hard to get a mortgage, where as the person with a 15% deposit will find it easier, as we already know they have some 'extra' money.


Now obviously there are all sorts of assumptions and probabilities involved in that, but it's just one of those things that can tip the balance.

princeofpounds

!!!!!!.......

I think beefturnmail is referring to the deposit paid on exchange (which is different to the deposit amount we normally talk about, the amount of equity being injected by the buyer into the purchase). It is annoying the terminology is so similar.


This is typically 10% of the purchase price, and is forfeit in certain circumstances if the completion fails. It ensures a very high motivation to complete and a high compensation if it doesn't happen.


If the vendor has a more expensive onward purchase, but little equity outside the property they are selling, then they might have to put extra money in on exchange, but find it hard.


But buyers with bigger equity deposits don't typically hand across an extra-big exchange deposit just so the vendor doesn't have to access extra cash for their onward purchase.

looknohands

libf wrote: »

If you've shown the EA you can afford more then look forward to them trying to drive your offer up, as they're generally paid a % of the sale price.

I haven't told them that's how much I can borrow, that 235k is an assumption Halifax made based on my earnings i didn't ask to borrow that much, they needed to see the AIP so I sent it to estate agent.

Also isn't what i will pay based on what I'm willing to pay? I don't see the property as being worth more than what I've offered so no way they can make me pay more.

looknohands

beefturnmail wrote: »

You pay a deposit on exchanging contracts and the balance on completion (via your mortgage company if through a mortgage).

All other things being equal, a higher deposit will therefore always be better from the vendors point of view - if you were selling which would you accept £20k cash up front and £200k a week later, or £25k cash up front and £195k a week later?

Obviously most vendors would probably prefer £20k up front and £205k a week later, over £25k up front and £195k a week later, but maybe not £20k up front and £201k a week later, so the EA is probably seeing if you can up your offer.

I would take the extra £1k offered on the house and loose out on having the addition £5k in my bank for a week.

looknohands

princeofpounds wrote: »

There are a number of reasons why this might make it harder to get a mortgage and proceed with the purchase. But probably the most applicable one is a retention.


This is where the mortgage survey (or a legal search of some other piece of data) throws up an issue that makes the house riskier to mortgage.


If it is a problem that can be solved by throwing some money and work at it, a mortgage lender will often demand a retention. This basically means that they keep some of the money back and only agree to lend it out when the problem is fixed. Therefore they reduce their risk if you turn out to be a bad bet and the problem is still there.


If you have a 10% deposit and a 5% retention is demanded, you will find it very hard to get a mortgage, where as the person with a 15% deposit will find it easier, as we already know they have some 'extra' money.


Now obviously there are all sorts of assumptions and probabilities involved in that, but it's just one of those things that can tip the balance.

If there was a problem with the house based on my buildings survey that involved major work I would most likely pull out of sale or negotiate with vendor a lower price for myself, I wouldn't look to the lender to cover this. I'd value the property a lot less if it had major issues. Would it be seen as inconsiderate to pull out of purchase after revealing problems like this, isnt that what a survey is for?

kellaree

looknohands wrote: »

I would take the extra £1k offered on the house and loose out on having the addition £5k in my bank for a week.

For the vendors, the reason they've chosen the other offer is that they are much more likely to even reach this point. Pointless accepting a £1k more offer, if you never end up seeing that money. £1k is terms of selling is nothing.

looknohands

They've accepted my offer, think the estate agent was trying to drive price up as was in mid range of guide price. Property is now off the market, now for the fun part! *sarcasm

cashbackproblems

Do you really think offering 1k more is going to make any difference? Sellers will even overlook an offer of 10k more if its unreasonable they can obtain that amount or are in a chain etc.

The most important thing is your LTV e.g, 80% or less is ideal and having a Mortgage in Principle (which you should NEVER show/tell the EA before the offer has been accepted!).