Exchange Deposit in a House Buying and Selling Chain

buffness

Good Evening All,

Please can someone provide me with some advice? This is the first time I have been in a 'chain' as the first property I purchased was a new-build and we were renting prior to that.

What happens to the 10% exchange deposit in a chain? We have budgeted for mostly everything (stamp duty, solicitors fees and money to purchase other items as we are buying another new build) but I am slightly worried that we will be asked to provide a 10% exchange deposit - we do not have those funds as the money is tied in the equity on our current home.

The chain is as follows:

Buyer A purchased a home for £111,950.00 from Buyers B - 10% exchange deposit at the start of the Chain is £11,950.00. This starts the chain.
Buyers B purchased a home from Buyer C for £299,950.00 - 10% exchange deposit for this sale will be £29,995.00.
Buyer C purchased our home (Buyers D) for £255,000.00 - 10% exchange deposit for this sale will be £25,500.00
Buyers D purchased a Redrow Homes New Build Home at £312,995.00 - 10% exchange deposit for this sale will be £31,299.50. This ends the chain.

Do we need to pay £31,299.50 to Redrow Homes on exchange? That money is tied up in the equity from the sale of the home. 

I have tried to find out by researching on the Internet and many are saying that the deposit moves up the chain - but I am unsure on what this means! Please can someone shed some light?

Many thanks

greatcrested

Either

1) you use the 10% you receive from your buyer and top it up from cash to the 10% required by your seller, or

2) you negotiate (via solicito) for a reduced deposit to your seller and simply pass up the 10% fromyour buyer.

Slithery

Officially B will need to put in £29,995 minus the £11,950 they have received from A, so £18,045 to make up their deposit.

C won't have to put in any extra as the £29,995 they relieve from B already covers their deposit in full.

D will need to put in £31,229.50 minus the £29,995 they have received from C, so £1,234.50 to make up their deposit.

However, what usually happens is that the solicitors agree to a lower than 10% deposit so that no extra cash is needed.

buffness

greatcrested said:

Either

1) you use the 10% you receive from your buyer and top it up from cash to the 10% required by your seller, or

2) you negotiate (via solicito) for a reduced deposit to your seller and simply pass up the 10% fromyour buyer.

Thank you - I'm just concious that Redrow Homes may not accept anything lower than 10%... 

oniongirl

Normally the chain agrees to use the deposit from the person at the bottom of the chain. Most people's deposit is tied up in the equity of their current property.

buffness

Slithery said:

Officially B will need to put in £29,995 minus the £11,950 they have received from A, so £18,045 to make up their deposit.

C won't have to put in any extra as the £29,995 they relieve from B already covers their deposit in full.

D will need to put in £31,229.50 minus the £29,995 they have received from C, so £1,234.50 to make up their deposit.

However, what usually happens is that the solicitors agree to a lower than 10% deposit so that no extra cash is needed.

That is helpful and makes sense, thank you. The reason I'm panicking slightly is because the Reservation Agreement that I am about to sign to secure this new-build property with Redrow Homes states that we are required to 'make a payment equivalent to 10% of the Actual Purchase Price'.  I'm not saying all new-build developers are the same but I get the feeling that Redrow Homes Solicitors' could and may state that we need to put down the 10%, as per the Agreement?! 

AnotherJoe

Strike that out of the RA and write in that you can provide £x (whatever your buyers deposit is)
It's negotiation. You don't have to agree to every para of the contract. 

Don't leave it to chance and hope.