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Nev M

Help - House Seller wanting Deposit before Exchange of Contracts

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Hi all,

I made an offer on a property and had it accepted last Friday, though i now know this gazumped a previous and probably frustrated cash buyer with a 5k less offer than mine. Knowing this I asked them to please remove all the other vendor boards from the property and for the house to be placed as STC. There is no Chain as i am a buy to let customer and they have already moved out.

I have an mortgage offer in principle and submitted the full application  now and waiting the full offer and then to pay the product fee and survey costs before they will send a surveyor (Virgin Money). Also i engaged and paid a deposit with the solicitor and they are working on this last couple of days.

"The Catch" Today when asked seller to take it off with other agents and advise the old buyer it was now of the market they said only if i paid a 2k deposit to there solicitor and they would do the same to make sure nether pulled out or the one a fault would lose this. I have never heard of this and can't understand why this would be used. Does anyone have experience of this or how it is set up if the case?

 Surely any such draft would have to state my side that the deposit is paid with the assumption that I get accepted for my mortgage, the survey comes back ok and accted by the building society as well as rental checks and that the legal work is all completed to me and my solicitor. If it contains all this then i do not see any benefit as when you have all this you can exchange contracts anyway with a deposit?

Unless of course they do not want to include assumptions and then that leaves great risk of lose of deposit?

Any thoughts, advise or help here appreciated as the deal is close to failing due to seller wanting this and me being wary of what they want in the contract for deposit and who pays the legal costs both ways. I have put my solicitor on hold for now as unsure where this is heading. In reality if i kept everything rolling we would potentially be at exchange in 3 weeks.

 

Kind Regards

Nev

Edited by Nev M
Typo's

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One more note. My solicitor said this was quite uncommon unless a new build and not to agree to it. However if we did then to ask them to have the paperwork drawn up and send it to them and they will review. I just can;t help but feel by the time all this is done we would be at and exchange point and they would have their commitment. Not sure what alternatives i can offer the seller for them to move this forward amicably for all and would like to if possible as all the other rental points max out for a buy here including purchase price.

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The purchase should always be "subject to contract" right up until exchange of contracts and the reason for this is due to unforeseen problems that may arise during the buying process like major structure defects revealed in the survey or undisclosed items that would not be included in the property sale that you thought were included and of course your mortgage money being declined by your lender even though you have the mortgage offer in principle you can still be turned down when the mortgage company start on the detail of their risk in lending mortgage money to you.

You could pay the £2,000 as an act of good faith that you will proceed to completion but stipulate that the deposit is totally refundable back to you should the property fail any structural survey report etc. etc.

Your Sol. will do this T&C for you and advise you on this matter.

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This may be an unusual situation but anyone who has sold or tried to sell property will recognise what's driving this request from the seller.

It's almost as though the seller wants similar timings and assurances that exist in an auction sale without them meeting the buyers need for them to supply a comprehensive pack of information up front. Your solicitor is right that you should only agree to this requirement if the seller provides that info pack.

Unless the property is being made available to you at way below market value or has some attractive development potential i wouldn't proceed under this requirement. I'd feel quite nervous that the seller knows of some defect in the structure or defective title that would block a normal sale. 

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Thanks Melboy and Richlist, both answers are very helpful and was along my line of though and research also.

Agreed Richlist I am very nervous but do see whats driving it. This practice is technically illegal in Scotland also i believe.

The property is below market value by around 10K and has a garden that others in area does not (That said the stamp duty takes me back up to that level). The refurb costs are looking to be around 2.5k less than i was budgeting also. The achievable rents are good in comparison to more expensive areas and so makes compelling commercial sense.

With both your suggestions and also solicitor advise i have agreed but asked the solicitor place in the contract the following terms in proper legal language.
In all honesty I think the survey will be done way before they even get this drafted up and all signed the legal conveyancing however probably will still be ongoing when/if we sign this.

 

  • Both parties agree to and undertaking of £2000 to be held as a Holding Deposit by each of their solicitors.
  • The buyer will guarantee the purchase of the property and if not purchased then lose the total deposit of £2000 to the vendor. The below exceptions and terms apply to this:
    - The buyer may pull out of the sale and be entitled for coverage of legal and survey costs from the vendor holding deposit should the sale fail due to failure of the mortgage survey to enable a mortgage or findings of that survey for recommended work to be done that both parties cannot agree upon resolving between them.
    - The buyer may pull out of the sale and be entitled for coverage of legal and survey costs from the vendor holding deposit if there are legal conveyancing reasons that make the sale none- viable. This also includes Legal escalations of costs due to the issues found with in the conveyancing process that is not deemed to be the buyers fault and that cannot be resolved or agreed with the vendor in a reasonable time.
  • The vendor will not ask for an increased offer over the purchase offer made and agreed and offers the buyer exclusive rights to purchase. The seller and will remove the property from all sites for advertisement and advise all parties interested this is sold STC and no offers or viewings are being accepted. Forfeit for this not adhering to this is the full deposit amount to the buyer
  • The Seller will not withdraw the sale of the property to the seller unless the seller is at fault. Forfeit for this not adhering to this is the full deposit amount to the buyer.

 

Thanks again Melboy and Richlist

 

Kind Regards

 

Nev

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