Exchange deposit

[gingajewel]

I have just posted this in chat but was wondering if anyone could help me! I have never sold a property before and feel in hindsight I have gone into it so naively. I didn’t realise that your deposit goes out on the day of exchange and not sale. All the money I have is tied up in my house and therefore how do I pay this deposit? From what I am reading the deposit from the bottom of the chain gets ‘passed’ through however what about if there is a shortfall from my deposit to the deposit that is being used as collateral?
Just for info it is a buy to let buying mine and then me and then two other people in the chain.
Thankyou

Exchange and complete on same day if you can't make up the gap

Would they not accept lower than 10%?

Ask them!

@midgedude getting hold of my solicitor is like getting an appointment with the queen, so I just thought I would ask here first!!

We negotiated with our vendor to use the deposit we were receiving for this reason. It was about 7% rather than 10%. Your solicitor needs to request.

@BadgerFace Thankyou

Badger is this usual / was it easy to get them to agree?

I ve just started a similar thread - my buyer wants to pay 5% (no chain behind him) but if I find a house to buy, rather than go into rental - I will need to pay more if they want the usual 10% (I'm downsizing).
Not sure if that will be easy.

5% is perfectly commonplace on exchange these days.

Ah ok, Mildura, I hope everyone would agree though, just not sure if every vendor would take it as the new normal...

As long as the deposit it quite substantial, the sum coming from the bottom of the chain is usually accepted along the chain- especially if you don't have the funds to top up. The Contract standard conditions say that the balance to make it 10% becomes payable if you fail to complete in accordance with the Contract, whether that means you are late or fail to complete. This is, thankfully, very rare though. Your solicitor may have already addressed and should advise you, or will have to prior to exchange.

My buyer couldn't afford the 10% (£37k) deposit for exchange, so we exchange and completed on the same day. It's quite common

We had exactly the situation @mackers1 describes. The value at exchange was what we were receiving but we would have been liable for more to make it up to 10% if we had not completed as per the contract.

Thanks all to use real figures, my buyer is putting down 10% which is 15k and we are putting down 10% which is 18k (although we have a lot more equity than this we are using this to pay off debt) would that 3k be ok as it won’t be a 10% exchange deposit or would we be expected to find the 3k?

There are risks in exchanging and completing on the same day though, as the vendor can pull out up to the moment of exchange. You may have spent a lot in a removal company, it leaves you no time to sort the admin around utility bills etc.

Your solicitor will talk to the others in the chain: e mail your solicitor and check it will all be ok.

OP: it will be fine.

Can you not pay the £3k and pay off your debt later rather than having your vendor save you interest on your debt...

We got a late request from buyers to not pay us a 10% deposit but something like 7 or 10%. Solicitor said it was ok and we were going into rental so we accepted it but it didn’t leave a good taste in our mouth, particularly as they asked late and we felt they’d messed us around chipping off at survey for things that they should have seen at viewing etc

Jarstatic deposit is just to secure the contrract though, you wouldn't get the actual money at the point of exchange but you; still get the total at completion so why would it matter?

I think it oly matters to people who are upsizing and need a higher deposit but as pp now reassured us, it seems it's fine to pass the lowest deposit along the chain.

*you'll still get

@gingajewel

Thanks all to use real figures, my buyer is putting down 10% which is 15k and we are putting down 10% which is 18k (although we have a lot more equity than this we are using this to pay off debt) would that 3k be ok as it won’t be a 10% exchange deposit or would we be expected to find the 3k?

We can't answer that because it's up to your vendor what they are willing to accept. However what you are suggesting is very normal and you're able to pay 83% of the deposit so you're not miles off.

You need to get hold of your solicitor and get them to confirm it with the vendor's solicitor. That's the only way you can get a firm answer.

@gingajewel

Thanks all to use real figures, my buyer is putting down 10% which is 15k and we are putting down 10% which is 18k (although we have a lot more equity than this we are using this to pay off debt) would that 3k be ok as it won’t be a 10% exchange deposit or would we be expected to find the 3k?

So on contract exchange day your buyers will put in £15k which is 10% for the purchase of your property. You ask your vendors to accept £15k instead of £18k on that day (8.3%) and this is normal practice. They can refuse but that would be rare.

In the event that the chain collapses between exchange of contracts and completion you would be liable for the £3k.

Assuming such a collapse doesn't happen, when you actually complete and your equity is released your conveyancor will deal with ensuring that the remaining £3k due is sent on to the vendors as well as sorting out the correct destinations for the rest of the money.

You don't have to exchange and complete on the same day. Its totally reasonable to need a gap between exchange and completion in order to be able to make moving arrangements safe in the knowledge that everyone in the chain is committed to the contract. Planning to exchange and complete on the same day is an open invitation for any member of the chain to cause chaos.

Definitely start the conversations through the solicitor as early as you can so everyone knows where they stand. As someone mentioned, it’s extremely rare to not complete after exchanging so it doesn’t really matter how much the deposit is, it’s just part of the process. I wouldn’t add the stress of exchanging and completing on the same day due to my buyer needing a lower deposit (there may be other reasons to do this of course).

I understand the request can feel odd if you are the vendor and have had other issues with your buyer in the process, my MIL recently sold her house and was very worried when her buyers asked her this until I explained it was fairly common place and explained why (and that we had done it). Part of her worry was really that they might pull out as they had messed her about on other things but a reduced deposit request is not why you’d pull out of a transaction.

When we bought it was a difference of £40k as we were upsizing but a deposit of £80k passed along our chain was still a pretty good reason to not default on completion even though it was ‘only’ 7%.

@gingajewel I would be surprised if your vendor said no to a £15k deposit rather than £18k as it potentially loses them the sale and they aren’t any better off on completion with a difference in deposit. In our case the sale wouldn’t have happened if our vendor had insisted on a 10% deposit as the funds were coming from a mortgage which we couldn’t drawdown until completion.

Get your solicitor to ask ASAP. Good luck, hope it all goes smoothly.

@CatAndHisKit

Jarstatic deposit is just to secure the contrract though, you wouldn't get the actual money at the point of exchange but you; still get the total at completion so why would it matter?

I think it oly matters to people who are upsizing and need a higher deposit but as pp now reassured us, it seems it's fine to pass the lowest deposit along the chain.

As I said, it was fine in this case. However, they only asked something like 2 days before exchange after they'd been delaying over minor issues (example a missing fence panel) at the same time as pushing us to complete 1 week later (when we had already said at the beginning we'd want 2 weeks as going into rental with the children to facilitate the sale). If it is such a minor thing, why not mention it earlier.