On Exchange of Contracts: Is it normal for the seller to request deposit by the Buyer - 10% of asking price

[BroglieBoy]

We are in the process of buying a property and the Solicitor's letter mentions the below line:

"On exchange of contracts, it is normal for a Seller to request payment by the Buyer of a deposit of up to ten percent of the price. If you have not already made provisions, please telephone me so that arrangements can be made to let us have the necessary funds."

Our Situation:
We plan to request for a completion date of 2 months from the day we exchange the contract This will allow us to give 2 months notice to our landlord from whom we are currently renting a house.
We have the deposit ready and if it is a legal requirement then we can release the money on the exchange of contract. However, I don't think that is the case but I am not 100% sure.

Question:

1. Is it mandatory for us to release the deposit on the day of exchange of contract? I thought we need to release the money only a few days( 3 to 4 ) days before the completion date.
2. Can we decline this request?
3. Why should we release the money 2 months in advance and lose interest on the same.

Thanks

Yes.
No.
Because that's how it works when you buy a house.

(Two months isn't a usual gap, however. You may find it's not agreed.)

Adding to 1- it won’t be sent to the seller until completion. Their solicitor will keep it in their client account until then.

I would go up the wall if you asked for a 2-month gap between exchange and completion just before exchange.

If it suited me and I knew about it, that's fine but you clearly haven't been advised well.

And yes, you do have to pay the deposit. It's the consideration, which is part of the contract.

Yes you have to release it.

No you don’t have a choice.

Does your vendor know you want 2 months between exchange and completion? Most sellers won’t be happy with that length of time.

I would not recommend any clients to agree to a two month wait between exchange and completion.

Are you first time buyers? If so yes you need to put the deposit into the solicitors' account - any interest should be repayable on completion. If you are also selling the deposit at bottom of chain cascades upwards.

Yes, 10% is standard. 2 months between exchange and completion isn't.

We bought our current house recently, we had 3 weeks between exchange and completion.

The gap between exchange and completion is usually a few days. It is also fairly normal when renting to have a overlap of the rent and mortgage

It is absolutely normal practice to pay a deposit. It stops you pulling out, as it is non refundable. It’s held by your solicitor, it doesn’t actually go to the seller.

What is not normal is a 2 month gap between exchange and completion. It’s perfectly ok if everyone is on board, but it’s not usual. As a seller I would think the deposit even more important if you wanted that big a gap. Have you actually communicated this to the sellers yet? Your post suggests you haven’t, you need to ASAP as they may refuse!

Thanks for quick responses. Much appreciated.

We are not FTB, but buying for first time in England and are not familiar with the process in detail. We have a house in Scotland and the buying process is very different in Scotland.

Ok. we are fine to release the money on exchange of contract if it is a legal requirement. I just wanted to make sure I under the process completely.

When we bought our first home we had 1 week between exchange and completion. We handed our rental notice in on day of completion, it meant paying mortgage and rent however we then could move in slowly and decorate first and had a plan should anything have gone wrong

We had a 5-month gap between E&C (at our request) and our buyer was happy to fall in with this.
The deposit didn't come up the chain for some reason so to avoid the chain stalling we paid the deposit for our new house ourselves. Our solicitor said it did occasionally happen like that and they could have chased the money there and then but luckily we were in a position to fund it ourselves so it wasn't a problem (apart from having to do a large bank transfer at short notice). Obviously the deposit was tracked down afterwards.

It is normal to pay a deposit of 10% on Exchange of contracts if you are the person at the bottom of the chain like a FTB.

People higher up the chain often pay a smaller percentage like maybe 5% the purchase price.

If you don’t want to lose interest on the money for so long ask for a month between Exchange & Completion ( or less time like 2 weeks) rather than 2 months.

My son is currently buying and has exchanged contracts early December. They’re not completing until early Feb because the vendors are emigrating to Australia and can’t go any sooner.

He’d accepted a mortgage offer from the bank, but last week saw they’d dropped their rates quite a bit so he went back to the solicitor and asked if it was too late to change mortgages. He was told that he can, but if it holds up completion by the agreed date then he’d lose 10% of his deposit. So yes, it sounds pretty standard. He ended up getting it sorted on time.

@BroglieBoy

Deposit on exchange is entirely normal. It shows your commitment to the purchase and if you do not complete then you will lost that deposit . In England this has been the case since Adam was a lad. It is not the vendor's problem if you want to not pay your deposit upon exchange because you might lose some interest.

If you want a 2 month period between exchange and completion I suggest you tell your solicitor right now , normally it is a month but different times can be agreed between parties. If the 2 month period is to suit you then be happy if the vendor agrees.

Also make sure you have the balance absolutely available on completion day and transferred over.

If you are FTBs - do come back and report if you are ever a vendor 😊

I'd say even a month is a long time between deposit and exchange. I've never had more than 2 weeks

@BroglieBoy oops - cross posted . I see you have the situation in hand. I had not appreciated you had only known the Scottish system. ( which I am not familiar with

All best with getting your new house 💐

I had 4 days between E and C. have you discussed the 2 months proposal with them during your negotiations. No problem if you have, but I would not be happy if not.

@SapphireOpal - it's a while now sice I have bought and sold , this house we exchanged and completed in one day , but now you mention it 2 weeks is very normal - you are right. One house we did a month at the request of the vendor but yes 2 weeks - thanks for putting me right there 😁

Thanks again. Yes, we have informed our solicitors about the same.

I believe they have yet to communicate the same to the seller's solicitor. We could reduce it to 1.5 months but not definitely below that. Hoping the vendor agrees.

2 months between exchange and complete isn't standard and very few would agree to it. In fact I'm surprised your solicitor would agree to it. Once you exchange you're committed to buying. They could do anything to the house in those 2 months! Leave it to get dirty and into disrepair. We had to pay for rent and mortgage for one month. If it helps rent is usually in advance but mortgage in arrears so even if paying for both one month you don't actually have both leaving account in one month.

Deposit is held by solicitor until completion. Usually not a problem as normally only a couple days between exchange and complete so you'd always have transferred all funds by then anyway! We exchanged and completed sequential days.

I sold my house last year and had 6 months between exchange and completion which everyone was happy with. And I made sure the house was well maintained too with anything wrong fixed during the period. Our buyers only initially paid 5% with the remaining 5% paid a month before completion. 10% is standard on exchange.

Why have you left it so late to tell the vendor about the longer app mostly planning around a much shorter gap.

We are expecting to exchange soon and have started packing!

Are you in a chain? Because it isn't just up to them to agree such a long time between exchange and completion but everyone in the chain and the chain may collapse.

I suggest you look into short term accommodation elsewhere at am airbnbb or similar or holiday let.