2% Deposit?

Muppit_2

Hi All

We are involved in a chain and upsizing to a bigger property. The person buying our flat is offering a 2% deposit at exchange and is unwilling to increase the amount because there is a 2 month gap between exchange and completion - and they agreed to this gap at the request of our seller.

We don't have a lot of spare cash, most of our "money" is tied up in equity in the flat we are selling. We are hoping that the seller we are dealing with doesnt request more for his deposit, as this will leave us having to provide the difference.

Is 2% Deposits common nowadays? I'd hate for the deal to fall through on a stupid thing like a deposit, or is that nieve?

Tozer

Its not common but I don't blame them. The fact is that on exchange, they are legally committing to purchase.

I wouldn't lose the sale because of this.

Oh, and you shouldn't actually use their deposit to fund your own as it is usually held by your solicitor as stakeholder (ie it doesn't belong to you until you complete).

PasturesNew

You wouldn't get your hands on their 2% deposit in any case. Whether it were 2% or 200%.

You also don't have to come up with the cash for your deposit - it's tied up in the equity.

Speak to your solicitor for clarification.

Muppit_2

Ok, but if the sale falls through, (say the buyer of our property pulls out) how will our seller get the 2% deposit if its tied up in our equity? (iif the property didnt get sold) Will my mortgage company release funds to the solicitors for the 2% and take us to court for the remaining 8%? As I understood it, when you exchange, your solicitor should physically hold a deposit, if you don't actually provide a lump sum to the solicitor, you still need to pay 10% if you pulled out. If the solicitor wasnt holding the full 10% though, you would have to go to court to get it.

Ty for your help so far, but still a bit cloudy.

Tozer

Not sure I understand the question. If the sale falls through after exchange, then your buyer loses the deposit and can be obliged to pay additional compensation. Not sure where the mortgage company comes into it at this stage.

Muppit_2

Thanks Tozer, I will try clarify my point. If you give a deposit which is theoretical i.e. money locked up in my sale. How is that really giving peice of mind to the seller? If my sale falls through the deposit is £0.

Tozer

Hello again. I'm not quite sure how that will work. Your deposit is entirely separate from the deposit your buyer is providing. One cannot be used for the other unless the buyer consents.

It will be used towards the COMPLETION monies (i.e. when you actually buy the property) but not at exchange.

Alternative could be to do simultaneous exchange and completion if you need the deposit money to fund your purchase. As you said there is a 2 month gap (which seems a long time!!) this won't be possible.

SquatNow

It's very simple.... complete on your sale immediately, store your stuff, and B&B it for 2 months until the person you are buying off is ready.

Muppit_2

yeah, 2 months is ages - but that was the sellers wish. The seller refused to give his tenants 2 months notice until we had exchanged contracts. We couldnt proceed with the sale if we didnt accept these terms. So we had a condition put in the contract so that we exchange contracts, then he gives his tenants notice, then when the tenants move out (could be two months), we would then complete.

Of course, after two months the tenants might not vacate and we would have to go rent somewhere, but we took the risk. We felt the offer we had on our property was a good one, and it was worth the risk to get the new property. We are due to exchange in the next week or so, I am just praying it all goes through, its all very stressful.

Thanks for your help Tozer.

Muppit_2

Squatnow - I don't think I would survive without my broadband and sky plus! hehe

On a serious note, I live in london so B&B's are really expensive.

SquatNow

Muppit wrote: »

Squatnow - I don't think I would survive without my broadband and sky plus! hehe

On a serious note, I live in london so B&B's are really expensive.

If you're planning to stay for a couple of months (or more, if the tennants put up a fight) you can get some really good deals... often cheaper than renting a place!!! B&Bs love long term tennants... gives them a steady revenue stream. In addition they'll do a deal to only clean the room and change the sheets/towels once a week instead of daily... saves them a lot of hassle/costs. (You wont want they coming in every day and moving your stuff around anyway!!!)

If you shop around a bit you will be able to negotiate some stonking deals... possible even gettig aplace next to work to save you the commute.