Exchange deposit

GDB2222

Adsta said:

As a FTB, I didn't realise this happened. I was wondering why the RA was so keen to know how much deposit I was putting down. Wish I knew this could have been used as a haggling tip. That said I stuck to what I was happy offering on the property I went for. 

So FTB with say 20% (or higher) would look more "desirable" if the vendor needs a bigger deposit?  

It's very unusual to ask for more than a 10% deposit, but in principle that might be done. 

saajan_12

btcp said:

AnotherJoe said:p

btcp said:

GDB2222 said

Anyway, your sellers may agree to less than 10%. So, it may not be a problem. Personally, I'd be rather reluctant to accept less than 10%, but maybe I'll change my tune when I come to sell.

I am thinking that 50k or 40k would not be a huge difference, in case my buyer has less deposit. On a scale of things I am nor sure 10k difference would make them pulling out of sale, losing 40k is drastic enough. Same I would hope that my seller understands that I would not want to lose 40k and it’s enough guarantee I am completing. 

The deposit is just there for easy access in case of failure to complete, it bears no relationship to to how much  can be claimed which might be much more or much less, than the 10% deposit.

If you owed £50k, say, then the fact you only handed over £40k doesn't matter, the extra £10k is still due.

What do you mean if I owed? I understand from this thread that the amount of deposit can be negotiated, so if it was agreed at 40k then I would owe that. The rest 10k I can cover by mortgage. 

Also failure to complete looks so unlikely to me, as people are obliged to sell by the contract they exchanged. 

Am I missing something?

Basically there's a difference between an exchange deposit (10%) and mortgage deposit (really just your equity day 1)

• Exchange deposit - This is how much you secure with the solicitor against your obligation to complete on the purchase. If you fail to complete, you are liable for the 10% at a minimum, or the seller's damages if they exceed this. You may negotiate transferring only part of this at exchange, but you'd still be contractually liable for the rest (regardless of whether the mortgage comes through)
  
  
• Mortgage deposit - this is how much non mortgage funds go towards the purchase price. If greater than the exchange deposit, It could either come from a sale at exchange, or a separate transfer from you. If less than the exchange deposit, you may get some cash back after the sale. 

Yes the failing to complete is unlikely, but that's partly because the steep penalty of 10% at least is a deterrent - so the exchange deposit is still necessary for that purpose. 

btcp

AnotherJoe said:

btcp said:

AnotherJoe said:p

btcp said:

GDB2222 said

Anyway, your sellers may agree to less than 10%. So, it may not be a problem. Personally, I'd be rather reluctant to accept less than 10%, but maybe I'll change my tune when I come to sell.

I am thinking that 50k or 40k would not be a huge difference, in case my buyer has less deposit. On a scale of things I am nor sure 10k difference would make them pulling out of sale, losing 40k is drastic enough. Same I would hope that my seller understands that I would not want to lose 40k and it’s enough guarantee I am completing. 

The deposit is just there for easy access in case of failure to complete, it bears no relationship to to how much  can be claimed which might be much more or much less, than the 10% deposit.

If you owed £50k, say, then the fact you only handed over £40k doesn't matter, the extra £10k is still due.

What do you mean if I owed? I understand from this thread that the amount of deposit can be negotiated, so if it was agreed at 40k then I would owe that. The rest 10k I can cover by mortgage. 

Also failure to complete looks so unlikely to me, as people are obliged to sell by the contract they exchanged. 

Am I missing something?

Yes. You are missing that you are liable for the costs of it falling through, and possibly also liable for 10% as a minimum even if the full10% isn't lodged with your solicitor as security, because thats all it is, lodged as security. Its not lodged as full and final liability unless the contract states that which is unlikely.   

Thanks I didn’t think about a liability if I fail to complete. I cannot imagine a reason why anyone would, after they already paid this amount which is very far from a couple of thousands. 

AnotherJoe

Adsta said:

As a FTB, I didn't realise this happened. I was wondering why the RA was so keen to know how much deposit I was putting down. Wish I knew this could have been used as a haggling tip. That said I stuck to what I was happy offering on the property I went for. 

They didnt want to know that because of the onward deposit.

They wanted to know how stretched you were so if there was an undervalue they'd know how likely it was  you could make up the difference. Say you were getting a 95% mortgage. Nowhere to go if undervalued. Ifa 50% mortgage and undervalue, well maybe you can move to a 60% mortgage and more of your own cash.

So, you wouldnt ahve been able to use it as haggling,since  it  makes no difference to the seller in terms of how much money they get.

 

Adsta said:

So FTB with say 20% (or higher) would look more "desirable" if the vendor needs a bigger deposit?  

Nope. Two different things*

Lets say you are buying a £100k house with a £20k deposit and £80k mortgage.

The vendors solicitor, at point of exchange, only will ask for £10k, eg 10%. At completion, they will want the extra £10k plus the mortgage co's £80k.

The fact the vendor of that house is buying say a £300k house and needs an extra £20k  (30k in all) isn't your problem. They might ask for extra deposit but i think that would be very rare and generally woudl be told to jog on. More likely is the £300k vendor would accept a lower deposit made up of your £10k plus some of your vendors money. 

* See Saaajans post above about mortgage deposit and exchange deposit.

Adsta

Thanks for explaining. That makes more sense to me now! 

btcp

One more question . Do anyone needs to see proof of funds for the deposit when making an offer on the house? I was hoping to show mortgage decision in principle and memorandum of sales, but come up with cash for stamp duty and deposit in the next month or so. Would that work?

AnotherJoe

btcp said:

One more question . Do anyone needs to see proof of funds for the deposit when making an offer on the house? I was hoping to show mortgage decision in principle and memorandum of sales, but come up with cash for stamp duty and deposit in the next month or so. Would that work?

Depends on the EA. Sounds as if you are going to be really stretched. If i was a seller I'd be nervous if that came to light.

When i made the offer on the the house I am in now, back last October I think, the EA wanted to see bank deposit details next thing.

(I was making up the difference between equity in existing house and new house with cash).  OTOH they didnt ask for proof i was sole owner without mortgage  (I suppose they could have looked on LR though).

Anyway point is they did ask to check immediately i made the offer.

btcp

AnotherJoe said:

btcp said:

One more question . Do anyone needs to see proof of funds for the deposit when making an offer on the house? I was hoping to show mortgage decision in principle and memorandum of sales, but come up with cash for stamp duty and deposit in the next month or so. Would that work?

Depends on the EA. Sounds as if you are going to be really stretched. If i was a seller I'd be nervous if that came to light.

When i made the offer on the the house I am in now, back last October I think, the EA wanted to see bank deposit details next thing.

(I was making up the difference between equity in existing house and new house with cash).  OTOH they didnt ask for proof i was sole owner without mortgage  (I suppose they could have looked on LR though).

Anyway point is they did ask to check immediately i made the offer.

Not so much stretched but I didn’t account for the deposit in cash. I will time to sell investment, get money from family etc. Then I get back this cash through a mortgage. 

Adsta

When I made the offer on my place EA never asked me for proof of deposit. They only asked to see my DIP. 

I wouldn't have thought showing a EA proof of deposit is a requirement? I've only ever seen most state they want to see a DIP. Of course the broker/lender will need to see your proof of deposit! 

btcp

Also I didn’t actually ask EA if they checked it with my buyer. I just asked them to check proof of finance but didn’t specify what. EA came back saying they are good to go. That’s it. I was hoping that the rest is solicitor’s job.