Reduced deposit?

Waardle

We are currently in the process of buying our first home through a new build company. We received a letter from our solicitors yesterday asking us to pay the remaining fees of approx £800 plus a £1000 “reduced deposit”.

Currently, we are still pre-exchange with no set completion date as the house is still being build. I have done some research and it looks to me like the “reduced deposit” they’re asking for is a pre-contract deposit I’ve seen mentioned elsewhere.

I have two questions really I was hoping you could clear up:

1. Is this normal practice when buying your first home through a new build company?
2. Am I right in thinking that the £1000 reduced deposit will be taken off the total deposit owed?

Any advice or share experience will be much welcomed!

AnotherJoe

No one can read the contract from here. Ask your solicitor.( to me it sounds like the contract for exchange but who knows ...)
If it is the exchange deposit , is there a long stop date in case the completion date moves out too far?

eddddy

As AnotherJoe says, that sounds more like a deposit for exchange of contracts.

Newbuild developers don't tend to use 'pre-contract deposits', they tend to expect you to exchange contracts 28 days after your reservation is made.

Once you exchange contracts, you will be contractually bound to buy the property (except perhaps if there is a 'long-stop date' clause.)

Do you have a mortgage offer that is valid up until the 'long-stop' date? If not, do you understand the risks?


And are you using a conveyancer who was recommended by the developer? They might be tempted to put the developer's interests a little higher than yours.

Waardle

Thanks for the responses guys. Yes, the conveyancer was recommended by the build company.

I called them up today so I fully understand what I am paying for and they have confirmed that the £1000 they asked for as a reduced deposit will come off of the total deposit we owe meaning instead of £10,000 we will now only owe £9,000. I was under the impression this was referred to as a pre-contract deposit!? Oh well!

Thanks for clearing things up guys

AnotherJoe

Still not clear.
Is this a reservation fee?
Or are you paying £100k for the house, would be expecting to pay £90k when you buy it with £10k deposit at exchange and instead they are asking you to pay £1k at exchange and the other £9k plus (presumably) £90k mortgage at completion?

Waardle

No, we paid a reservation fee of £99 (a reduced price) a few weeks back when we reserved the property. The house itself is worth £200,000 but as we’re first time buyers and buying through a new build company our deposit is 5% (£10,000). Your assumptions are correct though, the £1,000 reduced deposit will be taken from the £10,000 meaning we will only owe the remaining £9,000.

AnotherJoe

Ok, so this is the exchange, so at this point you will be locked in to buying, no way to back out, the only real issue is if the build date gets extended beyond your mortgage offer, because what happens if they won't extend?
Have you got a long stop date in the contract which enables you to back out and get your deposit back if that happens?

Waardle

Yeah we are about to exchange. Our mortgage offer is until mid-Feb and while we have no confirmed completion date we have been given a time range of between the end of September and the end of December for completion.

The financial advisors we have been working have said that the mortgage is easily extended so “not to worry” which I have in writing.

ethank

Every seems to have £99 reservation fee offers at the moment, but they tend to ask for a larger deposit within a few weeks. Note the full £10k will be required to exchange.

AnotherJoe

I don't think so. I think OP is saying that £1k is the exchange deposit.