Just found out that buyer's buyer has no deposit .. what now?

saajan_12

lucypilates said:

So the property was offered on in late Oct 2021 and we are only now at the point of exchange, which we are having to push for! Completion is in about 3 weeks time and the bottom of the 3-part chain was pushing for exchange and completion on one day. We said no - exchange ASAP please with completion when they requested. 

Today i get an email saying that the bottom of the chain doesn't actually  have their 10% deposit (first we'd heard of this situation!) but they are willing to exchange if we are ... the contracts will still say that they owe 10% if they default but we won't actually hold any money.

I guess we just have to suck it up as we are so close now and if we go ahead with exchange with no deposit, we're better off than not going ahead with exchange on these terms in that at least it is legally binding and there is the chance we would get some compensation if they default by way of taking them to court if needs be ...? - you could, but costs could magnify and if they don't own a property, you might get a judgement which you can't enforce. You could additionally have costs from your onward purchase, which you're liable for and then have to  chase your buyer, who chases their buyer, etc etc 
Has anyone else had similar circumstances and/or insight they can share with me?
 

thanks

So they don't have a 10% exchange deposit but will have the full 100% upon completion in 3 weeks? Presumably they aren't getting a 100% mortgage, so where is the other money coming from (aka mortgage deposit / equity portion)?  IS it just a case of they need 3 more weeks to earn / withdraw the money, or will it only be available upon completion?

Few suggestions / questions

1) Can you exchange in 3 weeks and complete in 4 weeks? (Assuming its a case of they'll have the money in 3 weeks, not tied to completion) That way you at least have a week to pack and get removals sorted etc, rather than a couple of hours by exchanging and completing same day. 

2) Can you ask your buyer to top up the deposit? That plus your buyer currently owning a property makes this not too risky as strictly, your claim would be against your buyer, and it would be their problem to recover from their buyer. 

eddddy

lucypilates said:

Just spoken with my solicitor ... i'll update later after i hear back ... 

Solicitors generally take a while to reply - because communication might only be done by email.  

(Your solicitor emails your buyer's solicitor; your buyer's solicitor emails their buyer's solicitor; they email their client... then the reply has to come back along the same chain.)


You might get much quicker feedback initially if you phone your EA, who should phone the EA below, who should phone the FTB.

Then you might hear back in hours, rather than days.

• You can ask the EA to find out if the FTB is really saying they have absolutely no deposit at all (because it seems a bit unlikely).

• And you can ask the EA to find out how much your buyer is able to add to the FTB's deposit

Since this might involve some negotiation / persuasion (i.e. seeing if each party can be persuaded to pay a bit more deposit, e.g. by borrowing cash from parents for a few weeks [although that might trigger AML checks]), an EA is a far better person to do this than a solicitor.

badger09

To put in some perspective, the top of the chain very often accepts less than 10% deposit. In fact, its not unusual for each link above the FTBs to accept a lower deposit.

When we were top of chain, which we broke so as not to delay it, I have no idea what deposit was involved but I'm 100% certain it was way less than 10%!

However, the red flag here for me is that FTBs don't appear to have any deposit to offer whatsoever. Where is the amount not covered by mortgage, coming from?  

Rambosmum

badger09 said:

To put in some perspective, the top of the chain very often accepts less than 10% deposit. In fact, its not unusual for each link above the FTBs to accept a lower deposit.

When we were top of chain, which we broke so as not to delay it, I have no idea what deposit was involved but I'm 100% certain it was way less than 10%!

However, the red flag here for me is that FTBs don't appear to have any deposit to offer whatsoever. Where is the amount not covered by mortgage, coming from?  

Yes, this is what we did. We ended up with virtually no real deposit as everyone below us was using equity for the deposit part, which they didn't have access to until completion. 

babyblade41

Rambosmum said:

badger09 said:

To put in some perspective, the top of the chain very often accepts less than 10% deposit. In fact, its not unusual for each link above the FTBs to accept a lower deposit.

When we were top of chain, which we broke so as not to delay it, I have no idea what deposit was involved but I'm 100% certain it was way less than 10%!

However, the red flag here for me is that FTBs don't appear to have any deposit to offer whatsoever. Where is the amount not covered by mortgage, coming from?  

Yes, this is what we did. We ended up with virtually no real deposit as everyone below us was using equity for the deposit part, which they didn't have access to until completion. 

That is fine but it's the bottom of the chain who has no deposit at all , or this is how I have read it 

Thrugelmir

babyblade41 said:

Rambosmum said:

badger09 said:

To put in some perspective, the top of the chain very often accepts less than 10% deposit. In fact, its not unusual for each link above the FTBs to accept a lower deposit.

When we were top of chain, which we broke so as not to delay it, I have no idea what deposit was involved but I'm 100% certain it was way less than 10%!

However, the red flag here for me is that FTBs don't appear to have any deposit to offer whatsoever. Where is the amount not covered by mortgage, coming from?  

Yes, this is what we did. We ended up with virtually no real deposit as everyone below us was using equity for the deposit part, which they didn't have access to until completion. 

That is fine but it's the bottom of the chain who has no deposit at all , or this is how I have read it 

Given the lack of availability of 100% mortgages makes you wonder what's actually going on. 

NQManchester

Can you find out why they have no deposit? Might be something legitimate that eases your concerns. 

When we bought our last house I’d put our money in a notice account expecting if we actually managed to find somewhere in the middle of the pandemic it would easily take the 90 days to exchange. 

We found somewhere chain free and only about 8 weeks to be ready to exchange but I didn’t have the cash available! (My bad!) 
I assumed we’d have to wait to exchange but our buyer suggested we just use the small amount we had access to as a deposit and we had the full amount back in time for completion. I still had to sign to say we would be liable for the full 10% so wouldn’t have exchanged lightly.

My rambling point is maybe they’ve done something similarly short sighted that wouldn’t be a long term issue. You don’t have to accept 10% to exchange it’s whatever you are willing to accept.