Buyer offering 5% deposit on exchange whereas I am paying 10%

Shookup

I am going through the process of selling my house and buying a new one.  My buyer wants to give a 5% deposit on exchange.  I have offered a 10% deposit on exchange to the people whose property I am buying under the advice of my solicitor and the belief that this is the norm. 

 Could this cause any problems if, god forbid, someone had to pull out after exchange happened?  Awful things can happen, such as people become seriously ill or suffer a bereavement.  What if my buyers suffered some dreadful event and had to pull out after exchange?  I assume they would then owe me 5% of my sale price.  However, would I then have to pull out of my house purchase and pay the people I am buying a house off 10%?  This doesn't seem fair.  What should I do?  Should I ask them to up their deposit to 10%?  Should I ask if I can change my deposit to 5%?

My buyer is not a first time buyer.  She is an elderly lady whose daughter is handling the sale for her.  They are mortgage free and will be cash once they have sold their house.  Their buyer is a buy to let who is buying with a mortgage.  I don't know why my buyer is only offering a 5% deposit.  I could understand more if they were a first time buyer and were struggling to get the deposit together but they are not.  

I am mortgage free and will be a cash buyer dependent on the sale of my house and the people I am buying off are no onward chain.

[Deleted User]

Yes, it's very normal. The deposit % often gets smaller as it simply gets passed up the chain.

If your buyers pull out after exchange, they will be responsible for your losses.

Shookup

Oh thank you.  I wonder why my solicitor is querying it then?

macman

Even if a death occurs, completion should still go ahead, as the estate of the buyer would remain liable to conclude the contract. Obviously though, a delay would result.

saajan_12

Shookup said:

I am going through the process of selling my house and buying a new one.  My buyer wants to give a 5% deposit on exchange.  I have offered a 10% deposit on exchange to the people whose property I am buying under the advice of my solicitor and the belief that this is the norm. - the contractual deposit will likely still be 10% on both sides, just your buyer is asking to pay 5% cash upfront and 5% at completion. If they fail to complete after exchange, you'd still be due the full 10% (or your damages if they exceed the 10%)

 Could this cause any problems if, god forbid, someone had to pull out after exchange happened? - well the difference is you'd have to recover the remaining 5% from the buyer rather than the solicitor. However since they own a property, you have a high chance of getting this (eventually)
Awful things can happen, such as people become seriously ill or suffer a bereavement.  What if my buyers suffered some dreadful event and had to pull out after exchange?  - those don't necessarily stop completion. It might cause delays, but the costs of failing to complete are high so it would be in the interest of your buyer (/buyer's estate / buyer's representative) to fulfil the contract. 
I assume they would then owe me 5% of my sale price.  - no, 10% However, would I then have to pull out of my house purchase and pay the people I am buying a house off 10%?  This doesn't seem fair.  What should I do?  Should I ask them to up their deposit to 10%?  Should I ask if I can change my deposit to 5%?

My buyer is not a first time buyer.  She is an elderly lady whose daughter is handling the sale for her.  They are mortgage free and will be cash once they have sold their house.  Their buyer is a buy to let who is buying with a mortgage.  I don't know why my buyer is only offering a 5% deposit.  I could understand more if they were a first time buyer and were struggling to get the deposit together but they are not.  - they are likely getting 5% up the chain from their buyer (as the houses down the chain are usually in decreasing value). The lady likely doesn't have cash to supplement their buyer's deposit, as her funds are tied up in the house -> perfectly normal. 

I am mortgage free and will be a cash buyer dependent on the sale of my house and the people I am buying off are no onward chain.

The contractual deposit is likely still 10%, they're just paying 5% of the cash upfront. If the buyer fails to complete, and if they don't promptly pay the remaining 5% (plus your costs if they exceed this) then you'd have to sue them for it, so there is a hassle factor, but you would be due it. 

The reason is likely because your buyer is getting a smaller deposit up the chain from their buyer etc.. so they may not have the cash on hand to top it up. However since they have a property, you do have a high chance of recovering it (eventually). 

AnotherJoe

The % exchange deposit passed across doesn't affect liability. It's taken just so there's something in the bank immediately   should the worst occur. It doesn't affect their legal liability. 

5% is suspiciously exact though. Normally (these days) it's the deposit passed on from the buyer below.  So it's strange that works out as exactly 5%. So that would actually worry me why they are doing that. Just to make it a round number?
I can't recall what it was on my recent sale / purchase but I do know it was passed up from my buyers buyer and that then went on up to my vendor. And certainly wasn't  10% , most likely much closer to 5% and I wasn't asked to make up the difference nor did I volunteer to pay 10%. If you are worried ask your solicitor if you can just pass whatever you get upwards. 

AdrianC

FTB on the 95% mortgage scheme, so entire equity "deposit" going into the exchange "deposit"?

AnotherJoe

AdrianC said:

FTB on the 95% mortgage scheme, so entire equity "deposit" going into the exchange "deposit"?

Nope;

BTL investor > "little old lady" buyer > OP