House Deposit Watch

KMLeeson
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#1
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Generally, when do you pay a deposit on a house? When you agree that you want it (say in February) or the month before you move in (say in August)?
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uberteknik
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(Original post by KMLeeson)
Generally, when do you pay a deposit on a house? When you agree that you want it (say in February) or the month before you move in (say in August)?
It's slightly confusing but:

A small holding deposit may be asked by the estate agent to show 'good faith' when you have made an offer to purchase the property and the purchaser has accepted your offer. This will place the property as 'sold subject to contract'.

In most cases the holding deposit should be small (a few hundred pounds) but more recently in hotspot areas, some agents have asked for between £1000 to £2000. Although legal, this much holding deposit is not standard practice and does not in any way form a binding contract so you should beware. NB The holding deposit is non-refundable if the purchase does not go ahead.

The idea is to give you time to complete your mortgage application, property valuation, arrange surveys, solicitors etc., and to give the seller confidence that you are serious and not just time wasting.

When your mortgage is authorised and you are satisfied with the conditions of the sale, satisfactory surveys etc. you can then agree a sale completion date and contracts are ready to be 'exchanged'.

It's at the exchange of contracts point that the contract deposit (major deposit) is paid and the property is contractually sold. At this point, the purchaser becomes responsible for the property. (The original holding deposit may be used as part of the contract deposit). The exchange of contracts deposit is also non-refundable should completion fail unless the contract is broken by the seller.

Normally, the exchange of contracts can be anywhere from a couple of weeks and perhaps up to six weeks before the completion date.

The completion date is when the balance of the purchase price is paid (together with stamp duty, arrangement fees, solicitors fees, disbursements etc. and the purchaser gets the keys to the property.

TL;DR:

Several months before moving in: holding deposit paid to estate agent (usually £500 or so). This is not a binding contract but the deposit is not refundable.
Around 1 month before moving in: contracts exchanged and major deposit paid (minimum 5 - 10% of agreed purchase price).
Moving in date: contracts completed, balance of purchase price paid, stamp duty, fees etc. paid. Keys handed over.
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ch0c0h01ic
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(Original post by uberteknik)
It's slightly confusing but:

A small holding deposit may be asked by the estate agent to show 'good faith' when you have made an offer to purchase the property and the purchaser has accepted your offer. This will place the property as 'sold subject to contract'.

In most cases the holding deposit should be small (a few hundred pounds) but more recently in hotspot areas, some agents have asked for between £1000 to £2000. Although legal, this much holding deposit is not standard practice and does not in any way form a binding contract so you should beware. NB The holding deposit is refundable if the purchase does not go ahead.

...

Several months before moving in: holding deposit paid to estate agent (usually £500 or so). This is not a binding contract and is refundable.
I agree with most of what you have said apart from your discussion regarding holding deposits. Most holding deposits are non refundable.

If you have to pull out or the sale does not go ahead for whatever reason, whether that is because of issues flagged by your property survey, or issues with the seller, estate agent or their conveyancer you forfeit your deposit (in the vast majority of cases).

If a seller or an estate agent asks for a holding deposit I would advise anybody to steer well clear. Consult your solicitor before you ever hand over any money, they will advise the same. Unfortunately home ownership can be very emotive and some less honest sellers and estate agents take advantage of the situation.
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uberteknik
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(Original post by ch0c0h01ic)
I agree with most of what you have said apart from your discussion regarding holding deposits. Most holding deposits are non refundable.

If you have to pull out or the sale does not go ahead for whatever reason, whether that is because of issues flagged by your property survey, or issues with the seller, estate agent or their conveyancer you forfeit your deposit (in the vast majority of cases).

If a seller or an estate agent asks for a holding deposit I would advise anybody to steer well clear. Consult your solicitor before you ever hand over any money, they will advise the same. Unfortunately home ownership can be very emotive and some less honest sellers and estate agents take advantage of the situation.
Thanks for spotting that. :-)

In part I agree, my mistake written very late last night and poorly proof read. Duly amended.

There are conditions where the holding deposit is refundable, for instance, if the survey valuation is significantly less than the sale price and no mortgage can be obtained; the property is found to have a structural defect not declared by the seller; misrepresentation; sitting tenant etc.

It's a potential minefield and the contract clauses are critical.

https://www.samconveyancing.co.uk/ne...ty-buyers-3392

In addition, as you say, unscrupulous agents may describe the holding deposit as a 'lockout agreement' but in reality it's a fee charged to the purchaser. In other words they are charging twice for the same service.

In all cases, caveat emptor, and the purchaser must always seek legal counsel before handing over any monies.
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Reue
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Personally I would never engage with an estate agent who required a holding deposit. All offers are subject to survey and legal searches.
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