Exchange and completion confusion

Mustlovedogs

saajan_12 said:

Mustlovedogs said:

Does that mean I'd need a 10 deposit to exchange, and then my buyer would need to do the same etc. All my funds are tied up in the house, so that means I could never buy a new build? 
If everyone in the chain has funds tied up in the house, then I'm assuming it's exchange and completion on the same day? 

You'd exchange on the same day as everyone else in the chain. Bottom of chain = no house to sell, so they would need a cash deposit, in theory 10%. That money gets passed up the chain. 

In practice, 10% of the bottom house may be less than 10% of the other houses, so either the others have to top up some £ or the seller has to accept less than the standard 10% (which is fairly common). 

Then some time later, the completion dates are the same so everyone's mortgages pay out and the full purchase prices flow up the chain. 

Mustlovedogs said:

Apologies I am using this forum a lot lately and appreciate all the advice.

I'm just a bit confused about exchange and completion as although I've bought 4 properties before I've always managed to avoid a chain.

Now I have a property I'd need to sell. I was looking at a new build but they want exchange in 6 weeks. Does that mean I'd need a 10 deposit to exchange, and then my buyer would need to do the same etc. All my funds are tied up in the house, so that means I could never buy a new build? 
If everyone in the chain has funds tied up in the house, then I'm assuming it's exchange and completion on the same day? 

As above, it can and usually does work in a chain. However in your case, the bigger issue will be when your new build is ready to be moved into.. Can take several months, which is usually longer than what others in the chain are willing to wait. So often you end up finding a property that's nearly ready or breaking the chain (buy then sell if affordable or sell then buy if you can find temporary accommodation). 

Thanks yes I was thinking this. The plot wouldn't be ready until September October which is probably too long for people to wait. So I will probably hold off for now. Thanks for the advice 

Albermarle

Bigphil1474 said:

You can't have a chain where everyone has all their funds tied up in their property. There always has to be a buyer with no property to sell in the chain to fund the first seller.

In reality it would be unusual for everyone in the chain to have no free funds, that was not tied up in the property.
Many people have savings etc., so could fund a deposit independently which might help the chain along, rather than having to reply on the first one in the chain.

Albermarle

 I was looking at a new build but they want exchange in 6 weeks. Does that mean I'd need a 10 deposit to exchange, and then my buyer would need to do the same etc. All my funds are tied up in the house, 

To add to the comments already made.
The fact that the developer wants to exchange in 6 weeks, does not mean you would have to agree to that.
You could see it more as an opening shot in a negotiation. However they often do want to exchange quite early and when the completion date could be up to 12 months away, or even longer.
Often developers will offer a part exchange option, where they buy your house as part of the deal.
You probably will not get the best price but it can take some of the hassle out of the process.

Mustlovedogs

Albermarle said:

 I was looking at a new build but they want exchange in 6 weeks. Does that mean I'd need a 10 deposit to exchange, and then my buyer would need to do the same etc. All my funds are tied up in the house, 

To add to the comments already made.
The fact that the developer wants to exchange in 6 weeks, does not mean you would have to agree to that.
You could see it more as an opening shot in a negotiation. However they often do want to exchange quite early and when the completion date could be up to 12 months away, or even longer.
Often developers will offer a part exchange option, where they buy your house as part of the deal.
You probably will not get the best price but it can take some of the hassle out of the process.

Thank you. When I queried it they did say they legally can pull the plug but as long as things are moving it's not in their interests to.
I've done part exchange before and it worked really well but this time they offered me 50k under market value so couldn't justify that loss.