Buyer only has 5% deposit

[LavenderLxx]

We’re at the final stages of selling my late fathers house - we have signed contracts and they are all ready to exchange and set a completion date for the coming weeks.

However I have just had an email from our solicitor to say that the buyers only have access to 5% of the deposit and would we accept that? They’d still be liable for the remaining 5% if they pulled out after exchanging but it would be harder to obtain the funds from them.

i don’t get the feeling that they will pull out now but you obviously never know?!!

Would you accept 5% deposit?

Yes absolutely. 5% used to be standard. I don’t see the issue. They obviously have a mortgage for the rest.

They’re not going to want to waste even a 5% deposit

If they’re close to exchange and your solicitor has seen their mortgage approval then I would. All that happens if they drop out and you keep the deposit and relist as you would have to anyway if you pulled out

I would. Also it's not as if you have huge expenses to pay if the sale falls through as it is a probate sale.

Do you mean they said they had 10% but now only have 5% so will you accept less money to start with and then they’ll owe the other 5% later? How has it got to this stage without their funds being proven?

I don't quite understand- with the 5% and the mortgage, are you getting your agreed price? It won't make any difference to you what percentage of their payment to you is a deposit- but the situation sounds a bit more complex than that...

Ive never paid an actual deposit when buying a house, it all gets sorted on completion day.

What would you do OP if it was a 100% mortgage they were having? (I dont think these exist now but they did and will again probably)

We had a similar situation last time we moved. Our buyer actually had no deposit as they had a 100% mortgage guaranteed by family or something. Our solicitor neglected to tell us this until it came to exchange when he said there was no point doing it early as no money to exchange! We were nervous doing it but we'd come so far and didn't think they'd pull out. Luckily it did all go through fine.

Do they have mortgage in place for the other 95% ?

Seeing as you are so close to completion, I would accept, you’ve got nothing to lose, as long as they’ve got the 95% mortgage in place.

I'm confused. Are they asking for a 5% drop in the price? E.g. house is £100k, they can get a mortgage for £90K, needed a £10k (10%) deposit but have only managed to scramble together £5k, so you have to accept a sale price of £95k? Or is it they can get a 95% mortgage? If it's the latter, I don't even understand why you're questioning it. It makes no difference to the seller. I could have put 25% down but only put 5% down so I had cash for renovations. No one questioned this, other than the bank making sure I knew the disadvantages of that.

I would accept that.

You get all the funds on completion date don't you so not sure it actually makes any difference to you what their deposit is? I thought that the deposit was really only for securing the rest of the funds with a mortgage.

Yes, I would accept that.
I’d want to know more about their circumstances but the point of exchange is the point of no return. Their solicitor wouldn’t allow them to exchange if they weren’t extremely confident everything was in place for a timely completion. One way you could mitigate that risk is suggest exchange & complete on the same day? Or a very short interval between the two.
How big is the deposit relative to the costs you’ve incurred so far for the sale?

Yes. It will make no difference to you. The legal liabilities remain the same. 5% deposit used to be a very common occurrence.

Turned out our buyer had none of the deposit and we had to exchange and complete on the same day ….

5% is still big money for them to lose

Yes, of course. It’s not a problem - you will still get your money at the end of the day. In the very very remote chance they don’t complete, you will get deposit plus interest.

I’ve exchanged for £1 before. As long as they can show they will have the funds for the transaction I’d have no issue with 5%.

Ive never paid a deposit, other than £250 holding fee (new build). Id not worry about it.

If they don’t pay you can have a charge put on their house. 8% interest is added per year so you could get a tidy profit when it’s sold

Many sales don’t have a physical 10% deposit, it’s a commitment on paper. The only issue is if completion doesn’t happen the only way to enforce the 10% deposit forfeit is to take the buyer to court. They are very unlikely to just hand over the money if they didn’t have it available to them at point of exchange so it’s something to keep in mind.

This is standard …

You're paying a solicitor to do your conveyancing - ask their advice. They are legally qualified, registered and are working for you. People on here are not.

I’ve accepted smaller deposits when selling houses. It is quite common for the first time buyer at the bottom of the chain to pay a 10% deposit and for this to get passed up the chain. Obviously as typically houses get more expensive along the chain, what was 10% for the first house becomes a lower % of a more expensive property. The options are to ask the other buyers to top up the deposit to 10% or accept whatever amount is being passed up the chain. I’ve always done the latter. It is pretty common.

yes, I accepted a 5% deposit when selling my relative’s flat after her death earlier this year. All completed fine!