Impact of small deposit on offers accepted

shiraz99

I have two offers on my property at the moment; the first and lowest acceptable offer came a few days back from a couple who have a buyer for theirs, no others.in the chain. I had accepted in principle to their offer but whilst waiting for them to sort and confirm their end I've had another viewing and much higher offer, which is more comfortable for me going forward. They are also a first time buyer, so no chain, the downside being is they're only putting up a 5% deposit which my EA is saying represents a higher risk.

The EA have gone back to the first couple to see of they will match the new offer, not sure how that will go given they already had to move up from a low starting offer. I'm not sure what's best to proceed, I definitely could do with the higher offer as it gives a lot more wriggle room but I don't also don't want to increase any risk to the sale as it's been on the market for some.time now. Any advice would be appreciated.

Brie

What difference does the deposit matter to you, it's the bank that's taking the risk by granting them a mortgage.  

ReadySteadyPop

shiraz99 said:

I have two offers on my property at the moment; the first and lowest acceptable offer came a few days back from a couple who have a buyer for theirs, no others.in the chain. I had accepted in principle to their offer but whilst waiting for them to sort and confirm their end I've had another viewing and much higher offer, which is more comfortable for me going forward. They are also a first time buyer, so no chain, the downside being is they're only putting up a 5% deposit which my EA is saying represents a higher risk.

The EA have gone back to the first couple to see of they will match the new offer, not sure how that will go given they already had to move up from a low starting offer. I'm not sure what's best to proceed, I definitely could do with the higher offer as it gives a lot more wriggle room but I don't also don't want to increase any risk to the sale as it's been on the market for some.time now. Any advice would be appreciated.

 Until their lender has valued your property they have just given you a number, anyone can make an offer, but does their bank agree? And with only a 5% deposit it is unlikely that they will "make up the difference" on a "down-valuation", the first couple sound like your best bet to be honest.

YoungBlueEyes

ReadySteadyPop said:

shiraz99 said:

I have two offers on my property at the moment; the first and lowest acceptable offer came a few days back from a couple who have a buyer for theirs, no others.in the chain. I had accepted in principle to their offer but whilst waiting for them to sort and confirm their end I've had another viewing and much higher offer, which is more comfortable for me going forward. They are also a first time buyer, so no chain, the downside being is they're only putting up a 5% deposit which my EA is saying represents a higher risk.

The EA have gone back to the first couple to see of they will match the new offer, not sure how that will go given they already had to move up from a low starting offer. I'm not sure what's best to proceed, I definitely could do with the higher offer as it gives a lot more wriggle room but I don't also don't want to increase any risk to the sale as it's been on the market for some.time now. Any advice would be appreciated.

 Until their lender has valued your property they have just given you a number, anyone can make an offer, but does their bank agree? And with only a 5% deposit it is unlikely that they will "make up the difference" on a "down-valuation", the first couple sound like your best bet to be honest.

I agree. I'd go with the first couple even though their offer is lower. 5% deposit is kinda tight really, if anything came up in their survey they'd be knocking lumps off your asking price to pay for it.

I don't know that I'd push the first couple to match the second higher offer either. Yes more money for you would be good but I'd not want to risk a sale, especially as you say your house has been on the market for some time. See what the first couple come back with, and decide from there.  

housebuyer143

Brie said:

What difference does the deposit matter to you, it's the bank that's taking the risk by granting them a mortgage.  

Because any down valuation will mean the OP has to reduce down, as they can't make up the difference and the lending criteria is super strict for 95% so they might not even be approved for it. They are riskier. 

pinkshoes

How confident are you that the higher offer matches the value of the house? (NOT the estate agent value - the actual value by the lender).

If you're in any doubt that their lender will value it at less than the offer, then their higher offer doesn't mean much as unless they have a secret stash of cash to pay the difference, then it's likely they will have to drop their offer to match the valuation.

dander

Agree with others the 5% deposit is a very vulnerable situation. Anecdotally I'm hearing of a lot of undervaluations from mortgage companies at the moment, and this kind of LTV is exactly where the lenders are going to be super cautious. FTBs are already more likely to get flaky and over-react to surveys and if these are supertight on budget, I'd worry that's extra likely.

It's tricky because obviously the buyers with small chain might have flaky FTBs buying their property with a 5% deposit and you're just one step removed, rather than safer. I think it depends on how different the offers are - how much room is there to be negotiated down from the higher price later in the process, but not end up worse off than you are at the lower price that's on the table?

km1500

another thing to be wary of is that if you sign contract to buy a place having signed contracts to sell your place but only a 5% deposits - if for whatever reason your buyers pull out then yes your buyers have to pay you 10% deposit but you only have 5% in the bank and will have to try and find the remaining 5%

 meanwhile you'll have to pay the people you are buying from for full 10%

AskAsk

i would stick with the first offer as they sound more surefire than the second offer.  5% deposit is quite low, which means there is not much wriggle room for them and they will find it harder to get a mortgage with only 5% deposit.

the mortgage may fall short and they won't have any cash to cover the shortfall.  the first couple have a house that they are selling, so they are in a more secure position then the FTB.

ReadySteadyPop

YoungBlueEyes said:

ReadySteadyPop said:

shiraz99 said:

I have two offers on my property at the moment; the first and lowest acceptable offer came a few days back from a couple who have a buyer for theirs, no others.in the chain. I had accepted in principle to their offer but whilst waiting for them to sort and confirm their end I've had another viewing and much higher offer, which is more comfortable for me going forward. They are also a first time buyer, so no chain, the downside being is they're only putting up a 5% deposit which my EA is saying represents a higher risk.

The EA have gone back to the first couple to see of they will match the new offer, not sure how that will go given they already had to move up from a low starting offer. I'm not sure what's best to proceed, I definitely could do with the higher offer as it gives a lot more wriggle room but I don't also don't want to increase any risk to the sale as it's been on the market for some.time now. Any advice would be appreciated.

 Until their lender has valued your property they have just given you a number, anyone can make an offer, but does their bank agree? And with only a 5% deposit it is unlikely that they will "make up the difference" on a "down-valuation", the first couple sound like your best bet to be honest.

I agree. I'd go with the first couple even though their offer is lower. 5% deposit is kinda tight really, if anything came up in their survey they'd be knocking lumps off your asking price to pay for it.

I don't know that I'd push the first couple to match the second higher offer either. Yes more money for you would be good but I'd not want to risk a sale, especially as you say your house has been on the market for some time. See what the first couple come back with, and decide from there.  

Yes, don`t scare buyers away because you have a set price in mind, this value might not be what buyers think it is worth.

bobster2

km1500 said:

another thing to be wary of is that if you sign contract to buy a place having signed contracts to sell your place but only a 5% deposits - if for whatever reason your buyers pull out then yes your buyers have to pay you 10% deposit but you only have 5% in the bank and will have to try and find the remaining 5%

 meanwhile you'll have to pay the people you are buying from for full 10%

Surely exchange of signed contracts normally happens on the same day - in a chain from the bottom up.

OP's solicitor would not normally exchange on the onward purchase - until contracts had been exchanged with OP's buyer (and paying deposit). And surely all this would only happen after OP's buyer already had their mortgage confirmed? So mortgage provider already happy with the valuation.