Impact of small deposit on offers accepted

shiraz99

dander said:

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?

I'm not buying another property. I'm hoping to move to a house I've inherited, but every penny counts at the moment and the higher offer does give me more wiggle room.

shiraz99

pinkshoes said:

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.

Quite confident on price. I've reduced lower than I wanted for a quick sale and it's around 8% lower than the average for the location.

km1500

bobster2 said:

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.

yes but they have been unhappy situations where contracts have been exchanged and then for some reason mortgages are pulled or whatever and they are unable to complete 

 yes you can keep their deposit and because you can't complete you probably use that deposit to fund your penalty for not completing yourself,  but if you haven't got their full deposit then you are out of pocket

for example you agree to buy a house for 250k and give them a 25k deposit

you have also sold your house for 200k and normally would have a 20K deposit but you agree to accept 10K

after exchange your buyer pulls out. you can't complete your purchase so your forfeit your 25k. normally you would have 20K to at least offset this, but if you've only got 10 then you are left trying to get the other 10 out of them