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?

We bought our first house with a 5% deposit.

We were in this situation too. Our (very difficult) buyer, who was at the bottom of the chain, annouced on the day of exchange that they only had a 5% deposit. We had to get everyone else in the chain to agree that they were happy to proceed with this - which they did, thankfully.

It was the final kick in the teeth after a catalogue of shitty behaviour!

Yes I would accept that.

Think it's quite common, especially in high value properties.

So long as the mortgage will cover the rest (so you are still getting the asking price) I can't see any issue - in the unlikely event it goes wrong you still get to keep the 5% which I would imagine will comfortably cover your costs, so you have nothing to loose.

Slightly surprised at the couple of people who have seemingly exchanged without a deposit!

I’d happily say yes.

You say no, they could pull out, you’ve spent all your costs for nothing.

You say yes, they could pull out after exchange, you get to keep the 5%.

But probably, you say yes, exchange and complete, all done.

Samw. I had to transfer before exchange. All funda actually - mortgage

I'd accept 5% and a copy of the mortgage approval for the remainder.

It's only the people at the bottom of the chain that have to find the physical 10% or 5%. So many people may remember more recent moves (no deposit) and forget their first move. It may also be different with new builds, I don't know as never bought one.

In the specific example given by @LavenderLxx their buyer needs to provide a deposit but it's not a deal breaker if they only provide 5% at this stage not 10%.

Of course the whole agreed amount is paid on completion day, the amount of deposit at exchange does not affect that.

Are they asking for price reduction, or is shortfall being added to the mortgage?

Did you ask your solicitor what the ramifications might be with a reduced deposit should things go awry?

I need this clarity before l can comment

You can exchange and complete on the same day. That’s what we did buying our first house with a 100% mortgage.

What does it matter? Surely if mortgage lender is happy and prepared to lend 95% then it’s not anyone else’s business…happy to stand corrected (only ever bought one house!).

It's only the people at the bottom of the chain that have to find the physical 10% or 5%

Not entirely true, if the house at the bottom of the chain is £100k, and there's a deposit from the buyer of 10%, but the house 4 links up is £800k, there's no way that the person selling at £800k is agreeing to exchange on £10k. It's quite normal for others in the chain to need to 'top-up' the deposit to make up the difference.

Source: I own a firm of estate agents.

Completely fine and increasingly normal but I also found it disconcerting when the solicitors announced this at the last minute.
The solicitors should communicate this sooner imo, but 5% of a house is still a massive amount of money no one would want to lose.

I'm Scottish, in my late 50s - have bought and sold several times and this is the first time I've heard of a deposit!

Scottish too…is it news to us as we have different system here? When I read ‘deposit’ I only thought of the deposit mortgage lender wants to qualify for the mortgage…

I thought in Scotland you normally pay a deposit at the conclusion of missives, but I could be wrong, I'm based in England.

Maybe. Although having been on MN for a few years now, I know more about the English way of buying and selling than I ever thought I would, and this is still the first time I've seen mention of a deposit being paid - presumably to the seller, or is it lodged with their solicitor before the actual sale goes through?

I also accepted a 5% deposit when selling our previous property, if they have the funds approved to pay the agreed price on completion I don't see an issue. Only potential issue would be if you needed that money to pay your own deposit for a new property, which does not seem the case here.

No. All funds, whether mortgage and/or cash, go to seller on date of entry. Once funds are cleared, keys are handed over.

Only time I've heard of a deposit is when you're buying a brand new house from a developer, usually before the house is even built.

Absolutely standard. Exceptionally unlikely they would pull out after exchange. And anyway, it sounds like you're not in a chain? If so then them pulling out could be good for you because you would get their deposit and be able to sell it to someone else still.

In England it's standard to pay a deposit when contracts are exchanged, usually 10%, although not infrequently agreed at 5%, but essentially can be any amount that buyer and seller agree upon.