What happens if you cannot complete after exchanging on a property?

[Orangelemonlime]

Hi there,

If we put down a deposit to exchange contracts, and then found we had a delay in finding the rest of the funds to complete the sale, where would we stand legally?

Does the Vendor have to wait for us to find the funds? Can they pull out and take our deposit? Is there a timeframe or a time limit?

If anyone knows the ins and outs or has been in a similar situation I would appreciate some advice. Thank you!

As far as I am aware, when you exchange you would set a completion date, if you don't complete on that date you would forfeit the deposit.

When we moved, I asked our solicitor if anyone did that and he said it had only happened twice in his 20-odd years experience, in both cases a husband had died between exchange and completion. Obviously, they still legally should forfeit the deposit but in one case the vendors said don't worry under the circumstances, in the other they had to pay.

Your solicitor will tell you but assuming you're in England you would expect to lose your deposit which is usually 10%.

No decent conveyancer would dream of allowing you to exchange without your finances in place. When you exchange you agree to complete on x date. If you don't complete on x date the vendor can keep your deposit and sue you for any additional costs incurred.

It's very much frowned upon and I would be surprised if your solicitor would allow you to exchange until you're in a position to complete. The penalties can be huge financially, ranging from forfeit of deposit to a daily penalty, often of a very high amount. I wouldn't advise it ...

Don't exchange until you know where the whole amount of money is coming from is the easy answer.

From what I remember from buying a house, we had to have the mortgage offer or proof of where the money was coming from in place before we could exchange contracts, it was written into the contract. Then you don't hand over any money until completion.

It's slightly different if you are buying a new build directly from the builder, you pay a small deposit (£100 or so) to hold the plot, then when the house is finished you have x amount of time to buy the house ie exchange contracts or they keep your £100.

That's what I understand. We were told that the vendor can request 10% of the cost of the property, so even if you have a 5% deposit they can request up to 10% of you don't complete. But your solicitor should have ensured you do have the funding in place

There was a long running thread on moneysavingexpert where the OP was buying a house but after exchange the vendor tried to pull out because they'd changed their mind. It dragged on for ages but eventually the vendor had to pay the buyer the equivalent of the deposit and a whole load of costs. It amounted to a pretty hefty amount of money!

Definitely a situation to be avoided. Is this an auction purchase? As previous posters have said, the repercussions of failing to complete can potentially be huge. (Not even talking about the stress and inconvenience created for all others in the chain (if there is one)). My advice is that if you have any doubts at all with regards to some of the funds for the purchase materialising, do not exchange contracts.

For more advice specific to your circumstances head over to the moneysaving expert house buying forum: forums.moneysavingexpert.com/forumdisplay.php?f=16

The folks on there are very knowledgeable.

The houses we have bought have both left exchange until literally the day of completion or as close as possible. We have always had to have the money ready to go.