Deposit on exchange

kmate

Hello,

It says on alot of the info on the web that when you exchange contracts, a deposit is also paid to the vendor.

Does this actually happen? Its just that I have moved several times and never done this. Is this because we have always exchanged and completed on the same day?

Nothing has been mentioned by anyone to us so far. We are due to exchange in the next couple of weeks and really dont have 10% of purchase price (example on one web-site) sitting around.

How does this work?
Thanks lots....

silvercar

If you exchange and complete on the same day you won't need a deposit.

5% deposits are often acceptable these days.

LandyAndy

As far as I understand, if you do not exchange and complete simultaneously then you are liable for a 10% deposit on exchange. It is up to your vendor if they are prepared to accept you actually paying a smaller amount. If you do pay a smaller amount you are still liable for the whole 10% if you do not complete.

terrierlady

the deposit comes up the chain plus 5% now a days is the norm for lots of people, new builds exchange even on the £99 reservation fees.
The contract does say 10% normally.

kmate

How is the deposit made up? Is it actual cash/cheque? Or is it an advance from a mortgage? The house we are buying is £350k, so obviously deposit would be £35k - 10% or £17k if 5% required. I cant imagine many people having that kind of money available, I am pretty sure the people buying our house for £270 wont have it either.

Can everyone in the chain just agree to not pay deposits at all?

Sorry, this is probably a really obvious one - but as I say we have always exch/comp on same day before!!!!!

silvercar

Assuming 5% deposits, you receive 5% of £270k from your buyer and you pass that to your seller adding your 5% of the difference onto it, so your seller receives 5% of £370k.

That is the normal process. Occasionally a problem occurs somewhere in the chain and the figures get adjusted or some anal solicitor refuses to allow his clients deposit to be passed along.

bobbie78

When i just got my first house we exchanged a week before we completed. I didn't have a deposit and they were aware of that from the start, I can't remember anything in the contract about a deposit either but I don't have it near me to check. Basically ask your solicitor and see if they really want one, i think it might be important if you have a gap of months between exchange and completion rather than days. My worry was just making sure my rubbish solicitor asked the mortgage people for the money to arrive on the right day to complete. Just my perspective.

charley1965

You don't pay a deposit as such if you have a related sale where your equity equals or surpasses 10%. So as you're buying for 350K, as long as you have 35K equity it will not be an issue, the solicitors use this as your deposit. Same thing has just happened to us, similar figures too. If your buyers are FTBs then they will have to supply 10% cash deposit (or less with your agreement).

kmate

Thanks everyone for your replies....sometimes it seems that these things are made more complicated than they need to be in my opinion!!!

Charley, yep, we have about £85k equity so going by what you have said this might be all we need. Got a feeling our buyers must have a big chunk equity too as it is quite a big step up for them - unless I have misjudged.

Makes me laugh that you need a deposit on exchange, there is an argument for needing a deposit MUCH earlier on in the process, as you are paying for surveys/mortgage applications etc so you are risking quite alot from the very beginning. By the time you get to exchange I sort of think that most reasons for you to pull out will have been eliminated ie;mortgage refusal etc.

sorry...must be hormonal.have been cross with everything all day...

cattie

kmate, I've just been experiencing such a problem. A letter from the solictitor seemingly asking me for a cheque for 10% deposit arrived last Friday. :eek:

Never having been asked for a deposit before when selling one house & buying another I was thrown into a panic as there is no way I could put my hands on the necessary money for a deposit.

Anyway, spoke to solicitor on Monday who tells me the deposit can come out of the proceeds of my house sale. Now why didn't he just say that in the letter & make things clear & save me a heck of a lot of worry over nothing.