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Buying and selling - is our exchange deposit not enough? In a panic!
58

rosemarycait96 · 22/09/2022 19:44

We are hoping to exchange next week on our house sale and purchase, and complete in mid-October. Chain is 4 parties, we're 2nd from the top with 2 below us.

We have just had an email from our solicitor saying "you can transfer the £24k odd that we need from you as per the draft accounts provided". Um... This is first we’ve heard of ANY money being needed from us on exchange. We hadn't received the draft accounts yet and didn't know this. We don’t have enough in the way of savings (10k in the bank), we just have our house sale, equity, etc.

We're selling for 305k, buying for 395k. Obtained a mortgage with 85% LTV.

In a total panic right now - just eaten my own bodyweight in pasta while in shock from reading the amount. We simply don't have the money and weren't told that we'd need to save up more/fork up cash on exchange. We'd ask family for money, but it's a lot of cash and my SIL with mental health problems has gone missing this week, everyone is rightly tied up with that and we're all worried. I'd hate to ask for money from family at a time like this.

I thought deposits usually just worked themselves up the chain on exchange? In that case, is it that the deposit from the chain isn't enough?

We (perhaps wrongly) were thinking all of the proceeds from our house sale + buyer's deposit would be the deposit for our purchase.

I've emailed the solicitor back asking for clarification but will be calling him in the morning to discuss. Before I ask him any stupid questions, could someone please explain how this has been worked out? Is there anything we can do at this point?

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cloutneerbeout · 22/09/2022 19:51

I don't understand, is this your deposit they're asking for? If so that's normal at exchange.

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justawfultoread · 22/09/2022 19:53

You should be able to use cash from the exchange of your sale as long as it's 10% of your purchase price. Discuss with your solicitor- we've literally just done this so don't worry! Just talk to solicitor- good luck

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Dippydinosaurus · 22/09/2022 19:54

Don't do anything until you've spoken to your solicitor on the phone. This may be a scam and the bank details are fake and not your solicitor

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SBAM · 22/09/2022 19:55

We were in a similar situation, in the middle of a small chain, we used the buyers deposit to work it’s way up the chain, even though it was smaller than the suggested % when we asked the solicitors they agreed to it.

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Thecatisboss · 22/09/2022 19:57

Some of the money requested may be Stamp Duty which would be just under £10,000 if this a replacement of main residence (at rates applicable today - this may change tomorrow!)

Definitely speak to solicitors tomorrow.

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stuntbubbles · 22/09/2022 19:59

The deposit should work its way up the chain. Have you accounted for stamp duty, estate agent fee, solicitor’s fee and all the paperwork extras that add up, and that’s the £24k?

try not to panic. Our solicitor was worked off his feet and never sent paperwork when he should, or forgot to tell us things, or asked for money when mixing us up with other clients. Conveyancing costs pennies so they pile up the work.

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rosemarycait96 · 22/09/2022 20:08

Thanks all. Trying to stay calm but this was unexpected!

Solicitor didn't clarify exactly what this money was, I'm assuming it's the exchange deposit, didn't think it could be anything else to be honest.

I knew there would be an exchange deposit, we just assumed our buyer's deposit would be used for that and weren't lead to believe otherwise. We'd accounted for stamp duty etc when doing our calculations on our sale and by our workings out, we should have a surplus of funds, not be 24k short. Hence our confusion.

Suppose I'll just have to ring the solicitor and find out in the morning...

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doobedooboom · 22/09/2022 20:10

Ours did this - we just said oh no we are only willing to put down the amount of the deposit we are receiving from our sale

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Blankscreen · 22/09/2022 20:12

If everyone in the chain is paying 10% deposit then you'll receive,£30,500 in your sale and will need to pay £39,500 on your purchase so definitely not £24k.

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Thecatisboss · 22/09/2022 20:14

If there is an announcement tomorrow re stamp duty you may be even better off!

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Blankscreen · 22/09/2022 20:15

The gap in the deposit often catches people out. Your seller may be willing to accept a slightly reduced deposit. Usually they are.

Don't transfer any money and ask for a completion statement. This will show the amount due. Ask your lawyer to agree a reduced deposit on your purchase.

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snowballer · 22/09/2022 20:18

Deposit passes up. It's usually only the bottom of the chain that needs to have the actual cash. In most cases everyone will be fine with less than 10%. Don't panic

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sammielouise · 22/09/2022 20:25

Verify by phone tomorrow - not by email. Our solicitor told us that they always confirm anything by phone as there's a lot of solicitor scams going on.. our bank also warned us about double checking. Just to be on safe side!

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Rutland2022 · 22/09/2022 20:27

We used equity from our sale as deposit, our deposit on exchange was only 6.5% from
our sale which our seller was fine with, but they can insist on 10%.
They just want to check though that if you pull out after exchange you will still be liable for the 10% and can get it.

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onemouseplace · 22/09/2022 20:29

I'm glad you've posted this as I've just been assuming the deposit would pass up the chain and didn't realise that it needs to actually be agreed in advance - we also don't have the cash to plug the gap as our sale is paying for our purchase!

Something to confirm with my solicitor tomorrow!

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rosemarycait96 · 22/09/2022 20:40

@Blankscreen
@snowballer

Thanks for clarifying (and everyone else too), that's what I'm hoping will be the case. I'll confirm by phone and won't do anything till we've received a breakdown of the amount, and will ask for the buyer's deposit to be used.

@onemouseplace It's totally caught us out! Definitely talk to your solicitor.

I will come back on here tomorrow after I've talked to our solicitor to update you all, here's hoping it's not going to be a massive problem for us...

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Nowheretoogo · 22/09/2022 20:53

You could exchange and complete on the same day?then only the bottom of the chain needs to hand over cash?

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ethelredonagoodday · 22/09/2022 20:58

snowballer · 22/09/2022 20:18

Deposit passes up. It's usually only the bottom of the chain that needs to have the actual cash. In most cases everyone will be fine with less than 10%. Don't panic

This. Our solicitor explained it that the deposit passes up the chain from the bottom. If there's a difference between that amount and the 10% value required further up the chain, it's accepted as custom and practice that the balance will come through on completion. If for some highly unusual reason this did not happen, those affected could sue for breach of contract. It's probably more complex than that, but that's the gist.

So nothing to worry about.

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ethelredonagoodday · 22/09/2022 21:01

But agree with PP's... give them a ring to talk through!

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Twiglets1 · 22/09/2022 21:36

rosemarycait96 · 22/09/2022 20:08

Thanks all. Trying to stay calm but this was unexpected!

Solicitor didn't clarify exactly what this money was, I'm assuming it's the exchange deposit, didn't think it could be anything else to be honest.

I knew there would be an exchange deposit, we just assumed our buyer's deposit would be used for that and weren't lead to believe otherwise. We'd accounted for stamp duty etc when doing our calculations on our sale and by our workings out, we should have a surplus of funds, not be 24k short. Hence our confusion.

Suppose I'll just have to ring the solicitor and find out in the morning...

It’s only the first time buyer who actually has to have a cash deposit saved up. If you’re second in the chain, your buyers will pay you 10% (normally) at Exchange. This money is then used to pay the deposit to the people you are buying from, and so on up the chain. It’s normally agreed between the solicitors that others in the chain pay a bit less than 10% but you can check that with your solicitor tomorrow.
There could possibly be a slight gap in deposit if your sellers do want you to pay the whole 10% deposit but nowhere near 24k. That figure may include the stamp duty , EA fees & solicitors fees. I’m sure it’s nothing to worry about as you are already prepared to pay those costs. You just didn’t expect them to have been presented the way they have by your solicitor. The main thing to remember is that your account will get the 10% deposit from your buyers before you are expected to pay out 10% (or just under 10%) to your sellers.

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ThunderstomsAreComing · 22/09/2022 21:43

rosemarycait96 · 22/09/2022 19:44

We are hoping to exchange next week on our house sale and purchase, and complete in mid-October. Chain is 4 parties, we're 2nd from the top with 2 below us.

We have just had an email from our solicitor saying "you can transfer the £24k odd that we need from you as per the draft accounts provided". Um... This is first we’ve heard of ANY money being needed from us on exchange. We hadn't received the draft accounts yet and didn't know this. We don’t have enough in the way of savings (10k in the bank), we just have our house sale, equity, etc.

We're selling for 305k, buying for 395k. Obtained a mortgage with 85% LTV.

In a total panic right now - just eaten my own bodyweight in pasta while in shock from reading the amount. We simply don't have the money and weren't told that we'd need to save up more/fork up cash on exchange. We'd ask family for money, but it's a lot of cash and my SIL with mental health problems has gone missing this week, everyone is rightly tied up with that and we're all worried. I'd hate to ask for money from family at a time like this.

I thought deposits usually just worked themselves up the chain on exchange? In that case, is it that the deposit from the chain isn't enough?

We (perhaps wrongly) were thinking all of the proceeds from our house sale + buyer's deposit would be the deposit for our purchase.

I've emailed the solicitor back asking for clarification but will be calling him in the morning to discuss. Before I ask him any stupid questions, could someone please explain how this has been worked out? Is there anything we can do at this point?

that's weird - I moved 18 months ago and nothing came in or out of my account on exchange - the deposit just moved up the chain.

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rosemarycait96 · 23/09/2022 10:04

SO

As it turns out, we were all correct and the exchange deposit is indeed moving up the chain on exchange, we're all good. No money needed just yet. We are exchanging next week most likely, after 7 very long months from the time of our offer.

However... The 24k is in fact our completion balance, after stamp duty, fees and everything had been taken into account. We had calculated that we'd need 10k, 13k at the most to complete. It's actually more like double that...

Please do your maths properly people, is the moral of the story here. We were way, way off with our estimations and will now probably have to borrow up to 10k off family in order to complete without issue.

Obviously wondering how on earth we're going to pay people back that amount of money, (if we can even borrow it). I'm 20 weeks pregnant and we won't have the cash to pay people back in any meaningful way once I go on mat leave.

Thanks everyone for your advice, I am glad it wasn't the exchange deposit tbh, that would have been even more worrying.

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stuntbubbles · 23/09/2022 10:22

Oh, yikes OP - I’m sorry. I’d almost prefer it to be the exchange deposit because then it’s someone at the top of the chain being an arse about getting their full 10%, and they can be argued down.

Presumablt you can’t exchange til you’ve guaranteed you have the full funds to cover stamp and costs. And you can’t really borrow the money: that affects your mortgage as it’s additional debt. It needs to be a gift, with family signing an affidavit saying so (even if behind closed doors you plan to pay it back). I’m amazed your solicitor didn’t send an estimate right at the beginning of the Conveyancing work? Before we even instructed, our solicitor’s quote was for their work but also estimates of stamp, estate agent fees, searches, etc, based on our rough figures for selling and buying.

Instead of borrowing from family can you add £10k to your mortgage, which gives you back £10k of your equity to use for costs?

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ScaredSceptic · 23/09/2022 10:34

Have you received/asked for a breakdown to check that the solicitor's figures are correct? I don't see how you could be so far out in your expectation of costs (unless there have been many unexpected issues) - presumably you had a quote from the solicitor before appointing them, and worked out the stamp duty using an online calculator?

I would definitely be querying this so I had a full understanding of how the costs can be so much more than anticipated.

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NoSquirrels · 23/09/2022 10:39

I’d definitely be looking to add the £10K to the mortgage if possible - is that not an option?

Where has the extra come from that you didn’t calculate for? Does the stamp duty announcement today help you reduce it?

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