10% deposit on exchange of contracts

ScottL45

Hi everyone,

With regards exchanging prior to completing, I am in the middle of a 5 property chain.  Do I need to use my own personal cash for the exchange?

Thanks

kingstreet

Not normally, no.
Buyers' deposits pass up the chain from the bottom and often become less than 10% as they go as the purchase prices increase. Solicitors make agreements to accept less but liability for the 10% remains if completion doesn't happen.

ScottL45

kingstreet said:

Not normally, no.
Buyers' deposits pass up the chain from the bottom and often become less than 10% as they go as the purchase prices increase. Solicitors make agreements to accept less but liability for the 10% remains if completion doesn't happen.

Do you think with everything go on at the moment, exchanging in advance is a good idea?  Also, for anyone else, is anybody aware of any last minute checks by lenders immediately prior to the release of funds that is causing problems, even potentially to the degree where a mortgage offer gets revoked?  These are such uncertain times with people going on and off furlough, being laid off etc. If I was a lender, what I agreed to 3/4 months ago may not still carry today so would be surprised if they do not risk assess any further offers.

kingstreet

Discuss with your conveyancer. Exchange and completion on same day would remove this concern.

[Deleted User]

I personally would not exchange and complete on the same day in a 5 house chain. A couple of days before so you can pack up and be sure you are moving is my ideal 

emma_829

ScottL45 said:

kingstreet said:

Not normally, no.
Buyers' deposits pass up the chain from the bottom and often become less than 10% as they go as the purchase prices increase. Solicitors make agreements to accept less but liability for the 10% remains if completion doesn't happen.

Do you think with everything go on at the moment, exchanging in advance is a good idea?  Also, for anyone else, is anybody aware of any last minute checks by lenders immediately prior to the release of funds that is causing problems, even potentially to the degree where a mortgage offer gets revoked?  These are such uncertain times with people going on and off furlough, being laid off etc. If I was a lender, what I agreed to 3/4 months ago may not still carry today so would be surprised if they do not risk assess any further offers.

Speak to your conveyancer they will give you the specifics for your situation and go over the details with you. However, the Law Society also has a section for home movers and COVID. They have prepared a set of clauses to be added to the contract if you intend to exchange in advance of completion. Of course, all parties in the chain would have to agree to the clauses being added as all of the contracts would need to be changed. 

ScottL45

Densol said:

I personally would not exchange and complete on the same day in a 5 house chain. A couple of days before so you can pack up and be sure you are moving is my ideal 

Yeah I agree and I know that the 10% deposit has been around for years but it's a proper hefty deposit.  Especially in these times.  I mean 2-5% is a good enough incentive surely?  That's still a decent wedge of money you're losing if you decide to pull out.  Having to commit to £55k when I'm just hoping that the current lockdown doesn't worsen and lenders revisit offers is a serious gamble.  Maybe I'm just over worrying but I;'m genuinely surprised that there are not more threads like this where people are concerned.

[Deleted User]

ScottL45 said:

Densol said:

I personally would not exchange and complete on the same day in a 5 house chain. A couple of days before so you can pack up and be sure you are moving is my ideal 

Yeah I agree and I know that the 10% deposit has been around for years but it's a proper hefty deposit.  Especially in these times.  I mean 2-5% is a good enough incentive surely?  That's still a decent wedge of money you're losing if you decide to pull out.  Having to commit to £55k when I'm just hoping that the current lockdown doesn't worsen and lenders revisit offers is a serious gamble.  Maybe I'm just over worrying but I;'m genuinely surprised that there are not more threads like this where people are concerned.

You would still be liable for the 10% if it went belly up even if it was agreed money used as deposit is less. 

Two days exchange before completion allows the conveyancer to draw down the money from the lender ( and then you know its coming !) and gives you two days piece of mind that is “definitely happening”

There are a few threads we see every week about redundancies just before exchange and even worse, those buying a new build that has a huge gap between exchange and completion - often “on notice” when builder ready. I dont think my nerves could take that over weeks / months that something may go wrong ! 

ScottL45

I'm kind of thinking that the standard time between exchange and completion is 1-2 weeks?  I wonder is that still applicable in these times, has it shortened at all?