House buy with deposit paid directly to seller

LesleyAnne85

Hi, I'm buying a house and need some advice. The seller is buying a new build and has requested:

• A 7-week gap between exchange and completion.
• My deposit to be released directly to them ("as agent") to pay for their new build's fixtures.

I'm very concerned about the risk. If their new house is delayed and they default on completion, my money will already be spent, meaning I risk losing my deposit or being forced into an open-ended delay.

Any advice, please? Thanks so much!

theartfullodger

Only after advice by and through your solicitor. Sounds iffy but IANAL.

Tabieth

That doesn’t sound great! What does your solicitor say about the deposit request?

saajan_12

The negatives:

• Yes you do lose the protection of a solicitor giving an undertaking that they will return the deposit promptly, but in practice it takes time anyway to negotiate through the notice to complete before treating the contract as breached.

The positives:

• Its a seller that owns an asset (the property they're selling). So you could get proof of their mortgage LTV and possibly also a credit check, to ensure you will get the money back one way or another.
• Also you'd only pay upon exchange, after which it is extremely rare for sales to fail to complete, provided your contract with the seller is for a fixed completion date, not completion-on-notice. So while the risk is real, its small and you'd be threatening to sue for other costs too whereby it would be easier for them to sell to you and move out temporarily.

Overall if you like everything else you might try to negotiate but it wouldn't be a dealbeaker for me. It really depends on how urgent the move is for you.. how detrimental would an extra few months be in the same place?

LesleyAnne85

https://forums.moneysavingexpert.com/discussion/comment/82159055#Comment_82159055

 I just spoke to my solicitor and they had no idea the seller was buying a new build! Worse, completion isn't a fixed date - it's 'on 8 days' notice.'!! This means I could be left in limbo for months with my deposit held 'as agent' (at risk). My solicitor is reviewing the terms now, but honestly this is a risky deal for me, as it is…

Herzlos

It's definitely a risk. Presumably the other risk is that they need your deposit to get the new build sale to go through. The hints to them being stretched already and makes giving them money 7 weeks early even more risky.

How much of the deposit do they need for the fixtures?

Can they instead vacate early to free up all of the funds? It'll be safe enough for them

saajan_12

https://forums.moneysavingexpert.com/discussion/comment/82159144#Comment_82159144

 I just spoke to my solicitor and they had no idea the seller was buying a new build! Worse, completion isn't a fixed date - it's 'on 8 days' notice.'!! This means I could be left in limbo for months with my deposit held 'as agent' (at risk). My solicitor is reviewing the terms now, but honestly this is a risky deal for me, as it is…

Well yes thatt makes a big difference - completion on notice usually comes with a long stop date whereby if the notice isn't given then everyone can walk away - the deposits have to be returned but there's no threat of 'a breach' so the risk of no completion is higher.

That would be the dealbreaker for me, whoever is holding the deposit funds.

Either decide you're happy to wait and on what terms (eg solicitor holds deposits) or insist on a fixed completion date and the selller would need to break the chain. They're in a much weaker negotiating position if they don't have a fixed completion date yet and need the deposit monies for fittings, so you can push back unless you're desperate for this particular house.

silvercar

It would be a no from me. No they can’t have funds and they certainly can’t use them for onward payment. Im sure their solicitor would advise them that a buyer’s solicitor wouldn’t allow this. As far as I know, deposits can only be used for onward deposits and then only through solicitors.

LesleyAnne85

https://forums.moneysavingexpert.com/discussion/comment/82159194#Comment_82159194

So I assume they need this as a deposit, as they don't have their own. No, they do not want to move until completion, which apparently can be whenever they feel confident to give me notice :( I have not signed anything

Herzlos

So I assume they need this as a deposit, as they don't have their own. No, they do not want to move until completion, which apparently can be whenever they feel confident to give me notice :( I have not signed anything

In which case you're at an impasse. How much do you want the house? Because you have most of the cards here.

Unless you must have that house and you're willing to risk giving them the deposit directly, they'd either need to break the chain and stay somewhere else until the new build is ready, or you'll need to withdraw. Withdrawing would mean they'd need to restart the selling process and almost certainly lose out on the new house as well as and deposit provided. It's much better for them to stay in an Airbnb or relatives couch for a couple of weeks.

eddddy

Looking at this from another angle…

Your seller will probably have to agree to "completion on notice" and "a longstop date".

Is your seller asking you to agree to the same?

If so, to illustrate with some made-up dates:

• Target completion date might be 15th January 2027
• Longstop date might be 15th July 2027
• (With completion on 8 days notice)

So…

• Target dates often slip with newbuilds. So you might complete any time between 15th Jan and 15th July (having been given 8 days advance warning).

• Your mortgage offer will probably expire before 15th July. In the worst case, you might not be able to extend it and you might be unable to get another mortgage offer - which could leave you in breach of contract. A financial disaster!

• If the newbuild isn't ready by 15th July - your seller (or you) might cancel the contract. You then have to start house hunting again. (Hopefully the seller will get their advance payment back from the housebuilder, so that they can return your deposit to you.)