Pre-exchange deposit VS seller to take good faith?

htcclub

As an FTB I want to understand what the sellers sentiment is at the very beggining when an offer is made.

Let's say an offer is accepted, I am hoping that showing proof quickly (in days) of having paid for surveys/searches would suffice to show commitment?

Avoiding me having to pay any holding deposit before exchange, specifically because I would want avoid negotiating a contract for the deposit. I would want to suffer no loss in the case of significant undisclosed repairs to the property/lender undervaluing the property, so I would need a clause for this if a deposit is required.

Additional to giving no deposit, would the EA/LL be receptive to take the proporty off the market also to stop gazumping - Because I am showing proof of monies paid for searches/surveys??

(I supposed it depends on demand in the area and also the fact I have no chain and good finance/solicitor ready counts as a bonus)

[Deleted User]

Who has advised you of a need to pay a holding deposit before exchange?

Are you buying a new build?

UnderOffer

You only pay the deposit at point of Exchange, so after surveys, after mortgage agreement and any negotiations on agreed price, ie if you have to reduce offer due to works on property identified by survey. 

The EA may ask for proof of funds and your mortgage agreement to reassure seller you are proceedable when you place an offer. 

htcclub

Deleted_User said:

Who has advised you of a need to pay a holding deposit before exchange?

Are you buying a new build?

non new build, I assumed this was needed to take the property off the market, if not then thats good

UnderOffer said:

You only pay the deposit at point of Exchange, so after surveys, after mortgage agreement and any negotiations on agreed price, ie if you have to reduce offer due to works on property identified by survey. 

The EA may ask for proof of funds and your mortgage agreement to reassure seller you are proceedable when you place an offer. 

hmm ok, but will they take the prpoerty off the market/remove for sale sign? I'm trying to reduce gazump risk

AdrianC

You're massively overthinking... FTB, y'say?

Offer accepted.
Give solicitor and financial details.
When chain is fully complete, get memorandum of sale.
Get started on conveyancing...
What's your biggest worry?
Time taken? Do everything asap, in parallel.
Money wasted in event of fall-through? Do the high-risk things first, survey if that's your big worry, lender valuation.

Mucking about with insisting that the EA proves it's off the market (especially if you're just basing that on RM flags), pre-exchange deposits, etc - it's just going to make people roll their eyes at best, get edgy about a flaky paranoid buyer at worst.

If the lender DO downvalue, does it actually affect your proceedability? Does it raise their perceived LtV to a point you can't afford to buy?

UnderOffer

hmm ok, but will they take the prpoerty off the market/remove for sale sign? I'm trying to reduce gazump risk

Unfortunately that could still happen, sellers could have a change of personal circumstances and have to withdraw, equally you could find you can’t proceed too and would pull out. You just have to be positive and proactive with the sale and ensure you do everything asked for by progressing the sale with your solicitor. 

AnotherJoe

Pretty much all  EAs will mark the property SSTC and stop marketing once the vendors have accepted your offer. If you are concerned they won't, make your offer subject to the property being marked SSTC with no more viewings. 

I have seen a very few  instances here where buyers are asked to place a deposit prior to exchange, indeed with their offer, but that is very unusual and I don't think most people here would accept that. Have you been asked this or are you just speculating? 

htcclub

Right thanks guys for the thoughts, I had read several articles about pre-exchange deposits on non new builds, mostly occuring in London (shock). So it's good to know it's not as common a thing as I first assumed.

AdrianC

htcclub said:

I had read several articles about pre-exchange deposits on non new builds, mostly occuring in London (shock).

Care to link to any?

princeofpounds

It's vanishingly rare. Normally when it does happen, it's because the seller wants to tie in someone who hasn't had the opportunity to discover the problem with the property yet! That's why no-one in their right mind would agree to pay a deposit before doing their surveys and searches and enquiries i.e. all the work that's needed to get to the point of exchange.

Sellers will generally take the property off the market on acceptance of an offer, although generally they look for a sign of financial commitment within a couple of weeks, like having a survey booked. And of course the EA should have already established the buyer is proceedable (i.e. has deposit money, a mortgage DIP and/or has agreed the sale of their own property).

Why do they agree to do this? Because if they keep marketing, the buyer will know about it, and most would refuse to progress with a seller who is actively trying to gazump them. There's usually a logical reason behind most of the conventions that have developed over time.

Sometimes sellers will try to keep them on rightmove but will not permit viewings, to raise a list of potential interest in case your offer falls through - that's a bit of a grey area, but cheating is relatively uncommon because it can easily be tested by getting a friend to try to book a viewing.

None of this provides ironclad protection from gazumping. Before exchange, nothing stops someone turning up at the doorstep with a huge briefcase of cash (metaphorically-speaking!). However, most houses have been well-marketed and the accepted offer is usually the highest (or otherwise most attractive). And most sellers are not looking out to get another couple of percent on the sale price to delay the transaction by months; there is a certain value to actually getting a transaction completed, it's not always straightforward! And in a rising market, if there is a more expensive onward purchase, then the sellers will actually be losing more money by delaying than not.

New builds the custom is a bit different; relatively modest reservation fees are more common there, but the structure of the contracts is also quite different too.

davidmcn

AdrianC said:

htcclub said:

I had read several articles about pre-exchange deposits on non new builds, mostly occuring in London (shock).

Care to link to any?

We've had a couple of threads here about people getting such requests from estate agents.