About to exchange but.....

[Jampot]

my agent rang this morning to tell me that our buyers don't have 10% deposit! We initially accepted their offer as they were stumping up 25% deposit via a government scheme thing and are in rented accomodation. Next day we had a higher offer which we rejected so as not to mess our originals around. So, we have signed our contract, they have theirs to sign and today we find there is no deposit at all, therefore no financial committment to proceed. This means we cannot commit to a deposit for a purchase confidently. I am cross that this has just cropped up as had I realised that they were not good for their money I wouldnt have accepted their (10k lower) offer. So Im left with these choices

1. Go ahead and hope we dont get caught out after committing ourselves

1. Explain our reasons and ask them to show their 100% committment by increasing the purchase price to the higher offer (4k)

1. Re-market the property and tell the agents to qualify the purchasers before letting us go ahead.

Can't you add a clause to your contract saying that if they don't complete they have to pay you the 10%. Think this should be in there already TBH, and it means they are contracturally bound to give you the money if they back out. So you won't have the money now, but will be able to get it later if you need to.

Personally I wouldn't try and remarket a property now, nor would I want to lose buyers over this. But I would check that they have a mortgage etc in place before exchanging

the thing is they physically dont have the money apparently although they do drive a nice Audi and presumably is paid quite a lot to manage a 220k mortgage!

Option 3.
If they are flaky now (what happened to the 25%?) and they don't complete, you will be out of pocket for your onward deposit, or if you complete on your new house may have to take out a very expensive bridging loan. Even if theoretically they are liable for the 10% how will you get it? Suing lengthy and expensive.

the 25% is put up by the government on completion as it is effectively a second charge which can only be added when they are the owners. Im v cross with the agents.

I cant afford to be out of pocket for anything to be honest.

any other opinions?

This place used to be a hot bed of discussion...

Don't do it. If they don't provide a deposit, they have no incentive to complete the purchase, leaving you contractually bound to complete on your purchase.

I would bollock the agents. It is their job to ensure that all the monies are in place. Tell the purchasers that, unless they come up with a 10% deposit (they can take out a loan if necessary) or you are remarketing the property immediately at £5K above the current sale price and, if they subsequently find themselves able to proceed, it will have to be at the increased price.

What have you decided to do, Jampot?

their solicitor faxed mine today and said that if their nominal amount (2k) isnt accepted then their client will have to pull out. We need to ask for 5k just to make sure that we're not out of pocket if they dont/cant complete otherwise we will remarket. Will speak to solicitor/agent tomorrow

or you could exchange and complete on the same day then you will never be out of pocket ?

If they don't have a deposit then presumably you don't have enough to pass it further up the chain so what you could do is get your sellers to accept a £2k deposit - that way you guarantee you will never be out of pocket - £2k is still a fair amount to lose by not completing.

Appreciate this wouldn't work if you had a long chain above as thats a lot of people to convince.

its a condition of their funding there has to be at least 2 weeks between exchange and completion. 2k wouldnt even cover my agents fees, let alone a deposit on a rental property and my abortive legal costs

Think most people could find £5,000 for 2 weeks if they had to, even if it is on a credit card or overdraft. Think it sounds dodgy that they can't raise that yet they can afford a £220k mortgage. I can see where the plan went wrong, but definitely don't think you should accept £2,000 deposit.

And further to what Freckle said above, I really don't think it's the agents fault. It is their job to do their utmost to ensure finances are in place when the sale is agreeed, but things have obviously gone awry since then, that is down to the client or their solicitor. But then, everyone bollocks the agents whether it is their fault or not, (yes, I am an ex-estate agent so you will think I am bound to say that, but I get fed up everyone slagging them off when sometimes it is not their fault at all).

Well, I'm sorry, but checking that the purchasers have a deposit available is fairly simple - you ask to see bank account statements or building society account. What can have gone awry since that check was carried out? Either they had it or they didn't. They are first time buyers, so are not reliant on their purchasers coming up with the money. So what checks did the agent make at the outset?

Estate agents earn a huge amount of money, sometimes for very little work (and I know that it has to cover all the properties that they don't sell), so basic checks are something I would expect them to make to ensure that this precise situation does not arise.

As Jampots post on Wed says, "the 25% is put up by the government on completion as it is effectively a second charge which can only be added when they are the owners".

I assume by this that they thought they would be able to use that 25% as a deposit, in the same way several years ago that buyers tried to use the cashback from a cashback mortgage to put down as a deposit. Of course agents then understood that this cashback did not come until the sale had gone through and so could not be used as a deposit.

There would have been no point agents checking bank accounts etc. as they did not have the money in there, the buyer thought they could use the money they would get from the government scheme, but of course this could not happen. Somebody did not understand the system, (or thought they could get a good deal and get away with offereing a very low deposit at point of exchange).

I maintain the solicitor was at fault, maybe the agents as well, but why not the solicitor? Just because they are professionals does not mean they don't get it wrong! They have more up-to-date dealings with the sale, the estate agent passes it to the solicitor when the sale is agreed.

having read my EA contract it appears i am not liable for their fees unless the sale proceeds to completion. I verbally asked them and the lass said she wasnt sure. Naturally i wont be paying them unless we do complete.

But unfortunately your solicitor will be looking for his/her fee. As freckle said above, this is why EA's fees have to be higher, to cover those sales that fall through or when a buyer just cannot be found. I never earned more than £10k for full-time, so it wasn't going to pay my wages and flash car, (the bus).

As to when Freckle said what can have gone awry since the sale was agreed - buyers can play dirty too - even if they did have a large sum of money in their bank account when the sale is agreed there's nothing to say it will still be there at point of exchange! Mortgage lenders can provide a mortgage agreed in principle letter, but this is before they have checked employer's references, accounts etc, so sometimes people cannot get the mortgage they thought they could.

Buyers play dirty, sellers play dirty, and of course sometimes EA's do, but it is of course the EA that gets the blame because he is the face that everyone speaks to and has the bad reputation. A lot of people don't understand how the system works, and it is a very stressful time, so of course when it goes wrong people look for somebody to blame. I am not saying that they are never to blame - far from it - but it is not as often as a lot of people think.

A lot of solicitors cause havoc because they don't sit down with all the papers in front of them until they are about to exchange, secretary's/legal execs. do a lot of the preliminary work so sometimes miss something, (this may well be what happened here).

I waffle, (only because I get very peed off by everybody assuming that EA's are all bent, nobody in my office was, we worked bloody hard for our customers).

Jampot - has your sale definitely fallen through, or could they come up with the £5k?

If they are getting a mortgage for remaining 75%, can't they pay the 10% deposit out of that? It's fairly normal, I think... One of standard sol questions is will you need mortgage to pay deposit at exchange?

I never suggested that the estate agent was bent - just that they hadn't done their job properly.

Jampot's solicitor would have no control over/access to information about the buyer's deposit - or lack of. The buyer's solicitor might well have been looking into that, but it isn't something that solicitors would deal with until it became relevant. Checking a purchaser's ability to proceed is very much part of the estate agent's job. Otherwise how can they recommend that purchaser to the seller? First time buyers particularly should be checked out as subsequent buyers mainly use their purchasers' deposit as their own deposit, but a first time purchaser would not be able to do this.

sale hasnt definitely fallen through - they can only stump up £2500 (the money they have for stamp duty). Ive yet to speak with my solicitor - in meeting, at lunch etc. I think this situation has arisen because the agent wasnt totally ofay with teh situation/scheme. They told me it was a 25% deposit so not necessarily the purchasers who have misled (or this is the impression im getting). I would have expected them to furnish me with all the details before asking me to make a decision though. If they had I would have not proceeded with this one

Any more progress, Jampot?

A 10% deposit is standard, and they buyers should have factored this in if they wanted to secure the house, no matter what the agents told them or didn't tell them. I would proceed with great caution.

no more progress yet freckle

They cannot stump any more money up (although I still fail to see how they can go into buying a house with no money at all). The alternative is to remarket the property but risk taking a lower offer or even staying here as houses do not appear to be moving very quickly. Now either its the time of year (possible) or all the hype regarding housing market. I assume they must have some money but possibly not money they are willing to put forward as deposit. As a condition of their funding we have to exchange by 29th February so I guess they have until then to find/negotiate a few more thousand and in the meantime we can remarket in case they pull out.

Option 3, surprised you're considering anything else. They have messed you about, you owe them nothing.

We are coming into the time of year (Spring) which is traditionally the best time to market properties. If you can bear to, I'd hang on and remarket.

They have not been honest. Their solicitor would have advised them that they would need a deposit, as would the estate agent - in fact both should have ensured that they had that money available before proceeding. Any government scheme which offers a 25% deposit which is not available until completion is not a deposit-providing scheme. They are offering 25% of the purchase price on completion, not a deposit.

It may be that the purchasers are a little naive, but in that case I'd be worried about their borrowing over £200,000!

What happened to the people who offered more money day after?

Can you still ring the people who made a new offer recently? We didn't accept an offer from a couple because we thought it was still on the low side. Found a house we loved a few weeks later and the only way to ensure we would get it was by accepting the lower offer (it was going to be cheaper in the long run). So... we rang them, and the woman was so happy that she started celebrating while still on the phone. They submitted all their documentation within a couple of days.