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Original poster

Question about 10% deposit at exchange

32 replies

Frazzled2207 · 03/03/2022 21:13

We are hoping to exchange on a house purchase (and sale) next week. Quite a long complicated chain.

We have just had a letter confirming that we need to come up with 10% cash on exchange. This is first we’ve heard and we’ve never been asked for proof of this. We don’t have any cash we just have a house to sell which is selling for about two thirds of the cost of the new house, plus a mortgage for the last third.

In a panic now. Do deposits work themselves up the chain? In which case the people below us are selling a house at a higher value than the one we are buying so I suppose there is a chance their 10% deposit once it gets to the sellers solicitor it could be enough? Perhaps that is why it hasn’t come up before?

At no point has anyone asked us for proof of cash for the deposit. I naively thought our house sale would basically be the deposit. Can someone explain how it works, thanks.

Ps obviously we have emailed solicitor back to clarify.

OP posts:
Original poster
Frazzled2207 · 03/03/2022 21:14

To clarify there is no mortgage on the house which is selling.

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greenbirdsong · 03/03/2022 21:16

Don't worry, we had the same sort of worry when we moved house. The "deposit" was coming from the equity from the house sale.

Our solicitor sorted it all out and I'm sure yours will confirm the same. We didn't pay any "cash" out as a deposit, the money was all dealt with the solicitor from the proceeds of the sale.

Good luck!

mudgetastic · 03/03/2022 21:17

The deposits can go up the chain in which case you need the difference between 10% of what you are selling ( which is what your solicitor gets from your purchasers ). and 10% of what you are buying

Or exchange and complete on the same day

BendingSpoons · 03/03/2022 21:18

When we have bought in a chain, the bottom of the chain has put down a deposit. We haven't had to, even though the property we were buying cost more. Clarify with them but hopefully it will be OK.

BuanoKubiamVej · 03/03/2022 21:18

At some point at the bottom end of the chain there is a first time buyer who has a deposit that they are quite expecting to hand over on exchange day.

It will be at least 10% of the amount that they are paying. It's quite normal for one deposit to be passed up the chain and serve everyone, though obviously the same sum that is 10% of house 1 is 9% of house 2 and 8% of house 3 etc and each set of solicitors negotiate that a little bit less than 10% is ok in most cases, though if there is a steep jump in value then maybe another link in the chain has to inject a bit more. So what's the differential between what you are buying and what you are selling?

Original poster
Frazzled2207 · 03/03/2022 21:18

Thank you I just wonder why she’s put the fear of God into us at 9pm at night.

The thing is though i’m not sure how she can use the proceeds of the house sale at exchange though. As clearly she won’t have that until completion Confused

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Original poster
Frazzled2207 · 03/03/2022 21:24

@BuanoKubiamVej

We are selling at £435k and buying at over £600k so quite a jump. That said our buyer is selling theirs at £700+k. Could that deposit ultimately help us?

I’ve not been party to any negotiations regarding deposits and have been in regular touch with solicitors.

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LaLaFlottes · 03/03/2022 21:28

I was worried about this too for our move and have just been told that the deposit will travel up the chain.

The house values in the chain are £450k £475k and £550k

I’m hoping it’s ok!

Original poster
Frazzled2207 · 03/03/2022 21:30

@LaLaFlottes
That’s reassuring thank you.

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LadyLolaRuben · 03/03/2022 21:30

I was in same boat. I put a token £100 down as deposit. Your solicitor will sort it one way or another if you explain

ukborn · 03/03/2022 21:38

I have only once paid less than 10% on exchange, when I negotiated well before to put down only 5%. You should make up the difference in cash. What your buyers sell their house for is irrelevant. They will put 10% of the purchase price of your house only. Why would they pay more?
Exchange is when it all becomes legally binding. If your buyer pulls out, they lose this deposit. And you put 10% on your purchase. That you had funds to do this should have all been checked well before now.
Unless all the solicitors (and their clients) have agreed differently, and the amount should be on the contract you signed, you need to make up the difference.

Original poster
Frazzled2207 · 03/03/2022 21:44

@ukborn
That does sound totally reasonable but this has been dragging on for months and never at any point mentioned.
The agents and solicitor have gone to great lengths to check that we have mortgage sorted and that obvs we are selling a house. I remember when I bought my first house having to show I actually had the cash but this time there has literally been no mention.

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Original poster
Frazzled2207 · 03/03/2022 21:49

Related question should I have only got a mortgage for the difference between the sale and purchase price minus a 10% deposit?

If we do somehow end up having to pay 10% cash then surely our mortgage will be too big.

Solicitor knows all about the mortgage. Surely she would have said if we were borrowing too much because we needed the cash upfront. What a mess.

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LaLaFlottes · 03/03/2022 22:14

@Frazzled2207 have you had a contract to sign yet? Did that have a deposit amount on it?

Original poster
Frazzled2207 · 03/03/2022 22:15

Yes I have one I don’t recall seeing that but I guess I’d better check Blush

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SeasonFinale · 03/03/2022 22:21

If you have a buyer too they will be paying a 10% deposit to you. The usual thing is for the solicitor to get permission to use that to fund your deposit. If it isn't the full deposit usually it just means you still remain liable for the full deposit if you didn't complete for some reason

Original poster
Frazzled2207 · 03/03/2022 22:26

@SeasonFinale

If you have a buyer too they will be paying a 10% deposit to you. The usual thing is for the solicitor to get permission to use that to fund your deposit. If it isn't the full deposit usually it just means you still remain liable for the full deposit if you didn't complete for some reason
That would make sense (and be fine by us). Also occured to me that our sellers may be fine with low deposit as they have no onward purchase and no risk.
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LaLaFlottes · 03/03/2022 22:50

@Frazzled2207 our Estate Agent explained it exactly as SeasonFinale says - I do think it’s common. We bought our current house with less than 10% deposit - it’s a new build so it was being paid to the builder rather than an individual but still the same scenario and I’m expecting to do the same again hopefully.

The deposit section on our contract doesn’t have a figure yet so assuming that’s because it’s tbc depending on the deposit coming up the chain.

Dougieowner · 04/03/2022 07:14

Sold last year and had been told the deposit was coming up the chain (a chain the lying EA had previously denied even existed!) but on the day it didn't happen and so we funded the deposit ourselves.
The solicitor said they could have chased the money but knew we had access to assets (significant savings ready for completion of our new build a few months down the line) so didn't push for it and instead we had a hurried visit to the bank to transfer our own money.

The deposit was there on completion but had we not had access to funds I don't know what would have happened on the day of exchange. I suspect it was an unexpected complication and the solicitor was just trying to save themselves some work (they were in a relationship with the EA and equally inept).

LaLaFlottes · 04/03/2022 07:46

Glad it worked out @Dougieowner

Does that mean your buyer did t pay you a deposit though?

Original poster
Frazzled2207 · 04/03/2022 09:17

Indeed @Dougieowner that sounds very stressful and something we could have done without. We also have a far more complicated chain than the agents let on.

Our solicitor has got back to us and confirmed that she does not expect us to pay the 10% but as pp have said we would be liable for the difference if we didn’t complete. She says it can sometimes happen than sellers insist on the full 10% and buyers have to find the difference but this is rare and not relevant in our case. Phew! I just wish this was clearer earlier. Thanks for everyone’s reassurance.

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LaLaFlottes · 04/03/2022 09:22

Phew @Frazzled2207 that’s great news!
Good luck with the move Smile

NashvilleQueen · 04/03/2022 09:29

When you say it's never been mentioned have you checked back to the initial terms of instruction letter you signed at the beginning? Mine was in there.

Original poster
Frazzled2207 · 04/03/2022 09:34

@NashvilleQueen

When you say it's never been mentioned have you checked back to the initial terms of instruction letter you signed at the beginning? Mine was in there.
It could have been but our solicitor has now confirmed she doesn’t expect us to pay
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Dougieowner · 04/03/2022 09:35

@LaLaFlottes

Glad it worked out *@Dougieowner*

Does that mean your buyer did t pay you a deposit though?

The deposit was paid but held by one of the solicitors and wasn't passed to us until completion. Didn't make too much of a fuss as we had funds to cover it but many would not be in that situation. I am certain that if it had been an issue our solicitor could have chased the deposit money and had it sent through as expected.