10% deposit when moving up chain

[Dougt]

We are selling our flat to a first time buyer, and buying a more expensive house which has been rented out, we have been told there is no onward property purchase for our seller.

We are close to exchange and our seller has asked us to top up the deposit we are getting from buyer, which we could do with savings but I am wondering why they want us to do this as they have no onward purchase that they need this for. We have a reasonable amount of equity in our flat which is being used to fund the purchase, not our savings (which aren’t huge and are basically just a few months salary for both of us). I could understand if they were buying somewhere and needed a deposit for this, but this seems unnecessary. And if our buyer pulled out after exchange we would be out of pocket but our seller would be sitting on a significant sum of money! I know it is supposed to be a 10% deposit but it must be quite normal to have to accept a lower amount - even when there is an onward purchase in a chain?

It is normal, I'd go so far as to say standard, to accept a lower amount than the 10%, but it's their prerogative not to I suppose (and taking the risk that the whole sale will fall through which you'd think they'd be nervous of at this time). If I had to take a guess, the reason they are insisting will be because of the (perceived) heightened risk of sales falling through even after exchange at the moment - if they would have huge costs as a result (not just to do with an onward purchase falling through but rent on wherever they are going to etc) I guess they want assurance they have as much money possible secured to them? And if your buyer did pull out you shouldn't ultimately be out of pocket as would be able to claim any reasonable losses from them, even above the deposit amount, although I guess this would be a long winded process and difficult if they have no other assets.

I would feel the same as you though, cashflow is always a bit tricky when moving and its annoying to have to cash in savings and have them sitting in solicitors account rather than being available to meet other costs. But unless you are prepared to call their bluff and walk away from the purchase I guess you are going to have to do it, maybe propose a halfway house between the 10% and whatever your deposit is?

Is this something that happens a lot? We've put any spare cash into buying a lease extension and into our mortgage, with a view to selling our flat and using the equity (which should include a bit more than 10% of the next mortgage since we've paid the mortgage for a few years) to pay for the deposit and SDLT. Should we have some savings put aside then for more than just solicitors and moving costs in case this happens to us?

Thank you for your reply maxelly!

I spoke to our solicitor- who said they would always ask for the deposit to be topped up as much as possible, but that in a lot of circumstances buyers have no more money. We have decide to offer a few thousand to top it up, sort of as a gesture of commitment, rather than every penny we have to try to get as close to the 10%! We'll see what they say!

I'm confused - I've never come across a scenario where the seller has any influence on any of this - surely it's between you and the mortgage company? You could pull out even if you were a cash buyer!

If you have your mortgage in place, the amount of your deposit has absolutely no impact on the seller (or am I missing something??)

Clearly I am missing something. Should have googled before posting. This article was helpful: www.which.co.uk/money/mortgages-and-property/first-time-buyers/buying-a-home/exchange-and-completion-a6n6m8p8czvh#headline_5

I still don't see why you should need to top up the deposit to 10%. Don't put yourself at risk by whittling down your savings, see if you can get your solicitor to agree a lower %

Having never bought and sold at the same time before it was not something I’d thought about either! It should have been something we covered earlier in the conveyancing process I think - not when we are so close to exchange.