Can somebody explain how deposits work in a house buying chain?

[MajorClanger123]

We have received our contract pack today from the solicitor.

Within our contract, it says that we need to provide a 10% deposit of the value of the house on the date of exchange of contracts. The solicitor has also written on her cover letter to include a cheque for the deposit, or confirm we will chaps it to the solicitors bank account.

We're a little by this - the deposit amount is £60k, and our only access to funds for the deposit is via the sale proceeds of our current house. How can we put down such a deposit before we've sold our own house? Isn't this why all properties in a chain have to coincide with same day exchange / completion??

That's a standard term. If you need the funds from your property your solicitor should provide an undertaking to the other side that you will have funds to complete. Your sol should check that your sale price will cover the remaining mortgage and leave enough for the deposit amount.

The deposit goes up the chain so your sols will use the deposit from your buyer plus any top up needed. Say for example you are buying for £600k and selling for £500k. Your buyer will provide a 10% deposit ie £50K and you will need to provide £10k yourselves or see if the seller will accept a smaller deposit (though they won't accept less than 5%).

Ahh ok, got it! We are indeed selling at 500k and buying at 600k so we'll need to make up the difference of 10k at exchange. That makes sense, thanks!

You may not need to make up the £10k if your seller agrees to accept a lower deposit.

You should also be aware that if, say, your buyer is selling for £400k you may he asked to accept £40k.

Then you may be asked to top up funds.

Usually though anything between 5-10% is acceptable.

It is rare nowadays for the deposit money to physically pass up the chain as the time between exchange and completion is a lot shorter.

Ok thanks fleur. My husband is still slightly as we don't remember doing this when we bought our current house - and that was a large step up the ladder. Will telephone solicitor tomorrow to clarify.

We didn't have to top ours up, everyone in the chain just agreed to pass it up as it was. Seemed like pretty standard practice.

We didn't top ours up either, and we doubled our mortgage. Our buyers, buyers deposit of about 10k went up the chain and we would have been liable for the additional 20k had the sale fallen through after exchange.