Deposits at exchange

Snookie12cat

Hi, I saw a post here about exchange deposits and now I wonder what are they?
Is this the deposit you have towards your purchase or something different? What if your buyer drops out after exchange and you therefore cant complete on your purchase, what happens to these deposits?

ilikewatch2

The exchange deposit is the funds you hand over when you exchange contracts - typically 10% of the agreed purchase price though this can be negotiated and where there is a chain it is common for the exchange deposit from the bottom of the chain to be passed up the chain.
This is different to your mortgage deposit.

GoogleMeNow

If you are a first time buyer, you will need a 10% deposit upfront in your solicitor's client account before they will exchange.  Then the rest of the monies in order to complete, in the solicitor's client account the day before completion.

If you are selling as well as buying, then the deposit paid at the start of the chain will be passed up the chain until the last purchase (so less than 10% on subsequent purchases), providing everyone agrees.

If anyone drops out between exchange and completion, the defaulting party will lose their 10% deposit for breach of contract.

doodling

Hi,

Snookie12cat said:

Hi, I saw a post here about exchange deposits and now I wonder what are they?
Is this the deposit you have towards your purchase or something different? What if your buyer drops out after exchange and you therefore cant complete on your purchase, what happens to these deposits?

There are at least two different uses of the word "deposit" when you are buying a house:

1. In the context of mortgages it is generally a reference to the amount of actual money (i.e. cash you have in you hand, or cash coming from the sale of an existing property) you are putting towards a purchase.
2. In the context of buying a house, it is the actual amount of money you transfer to the seller (or, generally, their solicitor) on contract exchange, usually 5% or 10% of the house value.

(2) is often part funded by the deposit from person buying your house although if you are buying a more expensive house then you might need to add to those funds to make it sufficient.

If your buyer drops out after exchange and you have no other way of completing on your purchase then you lose your deposit.  Fortunately you get to keep your buyer's deposit and you are able to sue your buyer for the difference between the two (not to mention any other costs you (or the chain above you) incur as a result of their failure.

Failing to complete after exchange is a very expensive thing to do, no-one in their right mind would do it unless it is someone else's fault and they can sue that someone to pick up the tab.

Snookie12cat

GoogleMeNow said:

If you are a first time buyer, you will need a 10% deposit upfront in your solicitor's client account before they will exchange.  Then the rest of the monies in order to complete, in the solicitor's client account the day before completion.

If you are selling as well as buying, then the deposit paid at the start of the chain will be passed up the chain until the last purchase (so less than 10% on subsequent purchases), providing everyone agrees.

If anyone drops out between exchange and completion, the defaulting party will lose their 10% deposit for breach of contract.

ok, So i am in the middle. My buyer is buying my house for £200k and i am buying mine for £400k.
Would I be required to part with 40k while they part with 20k, or would only the FTB part with the deposit and that is then passed upwards?

I didn't know about this and dont really have 10% of the property value to put up at exchange?

Snookie12cat

doodling said:

Hi,

Snookie12cat said:

Hi, I saw a post here about exchange deposits and now I wonder what are they?
Is this the deposit you have towards your purchase or something different? What if your buyer drops out after exchange and you therefore cant complete on your purchase, what happens to these deposits?

There are at least two different uses of the word "deposit" when you are buying a house:

1. In the context of mortgages it is generally a reference to the amount of actual money (i.e. cash you have in you hand, or cash coming from the sale of an existing property) you are putting towards a purchase.
2. In the context of buying a house, it is the actual amount of money you transfer to the seller (or, generally, their solicitor) on contract exchange, usually 5% or 10% of the house value.

(2) is often part funded by the deposit from person buying your house although if you are buying a more expensive house then you might need to add to those funds to make it sufficient.

If your buyer drops out after exchange and you have no other way of completing on your purchase then you lose your deposit.  Fortunately you get to keep your buyer's deposit and you are able to sue your buyer for the difference between the two (not to mention any other costs you (or the chain above you) incur as a result of their failure.

Failing to complete after exchange is a very expensive thing to do, no-one in their right mind would do it unless it is someone else's fault and they can sue that someone to pick up the tab.

Ok, good to know - thats what I worried about as my deposit would surely be double my buyers, so wondered if I would be out of pocket. So essentially it goes up the chain, so if we agree 10%, then my buyer puts up £20k and then that goes to my solicitor and I put up another £20k to make the 10% for my purchase?

TheJP

Snookie12cat said:

doodling said:

Hi,

Snookie12cat said:

Hi, I saw a post here about exchange deposits and now I wonder what are they?
Is this the deposit you have towards your purchase or something different? What if your buyer drops out after exchange and you therefore cant complete on your purchase, what happens to these deposits?

There are at least two different uses of the word "deposit" when you are buying a house:

1. In the context of mortgages it is generally a reference to the amount of actual money (i.e. cash you have in you hand, or cash coming from the sale of an existing property) you are putting towards a purchase.
2. In the context of buying a house, it is the actual amount of money you transfer to the seller (or, generally, their solicitor) on contract exchange, usually 5% or 10% of the house value.

(2) is often part funded by the deposit from person buying your house although if you are buying a more expensive house then you might need to add to those funds to make it sufficient.

If your buyer drops out after exchange and you have no other way of completing on your purchase then you lose your deposit.  Fortunately you get to keep your buyer's deposit and you are able to sue your buyer for the difference between the two (not to mention any other costs you (or the chain above you) incur as a result of their failure.

Failing to complete after exchange is a very expensive thing to do, no-one in their right mind would do it unless it is someone else's fault and they can sue that someone to pick up the tab.

Ok, good to know - thats what I worried about as my deposit would surely be double my buyers, so wondered if I would be out of pocket. So essentially it goes up the chain, so if we agree 10%, then my buyer puts up £20k and then that goes to my solicitor and I put up another £20k to make the 10% for my purchase?

Your solicitor will be able to negotiate with the other sellers solicitor if they are happy receiving the £20k deposit from the start of the chain. When we sold and bought we didn't add to the deposit, the sellers solicitor was happy with the deposit coming our way.

GoogleMeNow

Snookie12cat said:

doodling said:

Hi,

Snookie12cat said:

Hi, I saw a post here about exchange deposits and now I wonder what are they?
Is this the deposit you have towards your purchase or something different? What if your buyer drops out after exchange and you therefore cant complete on your purchase, what happens to these deposits?

There are at least two different uses of the word "deposit" when you are buying a house:

1. In the context of mortgages it is generally a reference to the amount of actual money (i.e. cash you have in you hand, or cash coming from the sale of an existing property) you are putting towards a purchase.
2. In the context of buying a house, it is the actual amount of money you transfer to the seller (or, generally, their solicitor) on contract exchange, usually 5% or 10% of the house value.

(2) is often part funded by the deposit from person buying your house although if you are buying a more expensive house then you might need to add to those funds to make it sufficient.

If your buyer drops out after exchange and you have no other way of completing on your purchase then you lose your deposit.  Fortunately you get to keep your buyer's deposit and you are able to sue your buyer for the difference between the two (not to mention any other costs you (or the chain above you) incur as a result of their failure.

Failing to complete after exchange is a very expensive thing to do, no-one in their right mind would do it unless it is someone else's fault and they can sue that someone to pick up the tab.

Ok, good to know - thats what I worried about as my deposit would surely be double my buyers, so wondered if I would be out of pocket. So essentially it goes up the chain, so if we agree 10%, then my buyer puts up £20k and then that goes to my solicitor and I put up another £20k to make the 10% for my purchase?

Yes, you could put up another £20k but it is also usual for the upward chain to accept the £20k without the top up, since most people have their equity tied up in their property rather than have cash to hand.