Exchange Deposit

dj240779

Have bought and sold numerous times over 3 decades. About to exchange today on another property and my solicitor phoned. He says the buyer is not providing a 10% deposit as it’s being held by the first person in the chain. We are not buying a property ourselves straight away so it’s not a huge problem, but I was concerned about this. It’s never happened on previous sales. Has anybody experienced this at all? My solicitor says 95% of sales are now done this way. 

kingstreet

Even if a smaller deposit passes up the chain, liability remains for 10% if completion doesn't take place. Yesterday;-
https://forums.moneysavingexpert.com/discussion/comment/77770127#Comment_77770127

sten_super

We exchanged earlier this week, and we were the ones providing the sub-10% deposit. We weren't putting any cash up for our purchase (just proceeds of sale plus new mortgage), and didn't have the £20k available to make up the difference to reach 10% on our purchase, so asked our vendor (via solicitors, but a good couple of weeks before exchange!) whether they'd accept a lesser (in percentage terms) deposit. Thankfully they did.
As kingstreet says, it was made very clear to us in the contracts that we were still on the hook for 10% if we don't complete. 

Slithery

It's up to you whether to accept a reduced deposit or not. Your solicitor should have gone over this with you before now.

mrschaucer

dj240779 said:

Have bought and sold numerous times over 3 decades. About to exchange today on another property and my solicitor phoned. He says the buyer is not providing a 10% deposit as it’s being held by the first person in the chain. We are not buying a property ourselves straight away so it’s not a huge problem, but I was concerned about this. It’s never happened on previous sales. Has anybody experienced this at all? My solicitor says 95% of sales are now done this way. 

It's entirely your choice as to whether you are happy to proceed, regardless of what the solicitor says.  If you don't need that 10% deposit to put towards your onward purchase then you are in a better position than many vendors, who would then have to negotiate a lesser deposit with THEIR vendors, and so on up the chain.  Your purchasers are still liable for the full 10% if they fail to complete, but rather than the solicitors holding the full deposit money and releasing it to you, you might have to take the failed buyer to court to obtain the outstanding sums.  But in reality this rarely happens.  

greatcrested

If you decline and insist on the full 10%, which you are perfectly at liberty to do, your buyer will have to

* use savings

*  find the cash elsewhere eg friends, family or short-term loan/credit card

* propose simultaneous Exchange and Completion (increasingly common), or

* withdraw from the purchase

If you agree to a reduced or zero deposit, yes, the buyer is still legally bound to pay you the 10% if they fail to Complete, but that's only any good if they actually have the money.....

FinallyStoppedLurking

It's a non issue. Don;t worry about it. Good luck. 

badger09

We're 2nd from top in a chain of 5, but with the most expensive house. I know the deposit comes up the chain and we're ok with accepting less than 10%. But, its just struck me that if FTB's deposit is the only deposit being passed upwards, then our buyers will be paying well below 5% deposit. 

Any thoughts?   

Slithery

badger09 said:

We're 2nd from top in a chain of 5, but with the most expensive house. I know the deposit comes up the chain and we're ok with accepting less than 10%. But, its just struck me that if FTB's deposit is the only deposit being passed upwards, then our buyers will be paying well below 5% deposit. 

Any thoughts?   

You are correct.

badger09

Slithery said:

badger09 said:

We're 2nd from top in a chain of 5, but with the most expensive house. I know the deposit comes up the chain and we're ok with accepting less than 10%. But, its just struck me that if FTB's deposit is the only deposit being passed upwards, then our buyers will be paying well below 5% deposit. 

Any thoughts?   

You are correct.

LOL serves me right for the badly phrased question. 

As I've no intention of derailing the chain on account of this, I will just hope we're not one of the tiny minority who have to sue for the deposit balance.

dj240779

Thanks for all the comments on this. I was annoyed as I was only told about this 30 minutes before exchange and it was take it or leave it. If I had more notice, I could have done more research and negotiated. My solicitor says 95% of purchases are done this way. I don't know if that's true or not but went with it anyway.