Can I lose my deposit if someone else collapses the chain after contracts?

Steveire

We're sale agreed (yay!). FTB.

The people we're buying from need to buy somewhere else, so that seems to mean we're in a chain.

Now I'm trying to understand the rest of the process and the dangers that could lie ahead. I'm looking for the worst horror stories. We'll get the survey done before contracts, and we already have a good solicitor. So, I'm assuming the contracts won't be signed if there is any unforseeable problems with the house.

What I'm wondering about though is - what happens if someone else in the chain backs out after we've all signed contracts? They lose their deposit (the estate agent keeps it??? Seems bizzarre) and they don't move out. However, that means that the people who were going to move in to that home now can't sell either. Do they lose their deposit to the estate agent too?

Does this go all the way back to us meaning that we can lose our deposit through no fault of our own? I'm guessing this is why contracts are 'subject to conditions', and hopefully have a clause that the deposit has to be returned to us in that case?

Also, is the deposit that the EA gets when the contract is signed 10% of the property price, even if we're paying 20% using savings? Or is the entire 20% (ie anything not provided by the mortgage) deemed to be 'the deposit'?

drunkmonkey

Don't get the survey/valuation done before you have the contract, the sale could fall through and you've just wasted money.
You can get your deposit back until you sign the contract.
Shop around for mortgage insurance and home insurance.
Your solicitor will explain everything involved including advising you of an expected closing date.
As your in a chain a few things have to fall in place and things could drag on so keep your eyes open for other places.

astrofool

Survey is usually done before contracts are sent out, usually they're scheduled immediately after going sale agreed, nothing makes an EA more nervous about a sale not going ahead than a buyer who won't get the survey scheduled. When you're in a chain, everyone needs to be confident the sales will go ahead.

dudara

You’ll need the survey done in order to get the final mortgage papers, and that’s a pre-requisite for signing the contracts.

I didn’t ask this question to my solicitor as we were buying a house following probate, so no chain involved. But your solicitor should be able to assure you on this. I’d imagine it’s a reasonably standard scenario and there must be clauses to protect in case of it happening.

BrokenArrows

Yes the survey should be done as soon as possible which will raise any concerns about the property.

At this point you can backout without having spent a lot of money with your solicitor and wasting months of everyone else in the chains time.

You pay the deposit when the contracts are exchanged, If after this point YOU pull out of the purchase then you lose the deposit. It doesnt matter what the reason is, if YOU cancel the sale then you lose the deposit.

If the seller cancels the sale then you get the deposit refunded and you can sue them for any other expenses you have incurred. eg Solicitor, survey, extra rent you have to pay etc.

Nobody is legally responsible for anything until after contracts are exchanged.

After an exchange, not only can you lose the deposit but you can also be sued for any further costs that the other party has incurred.

If you were in the middle of a chain and it all collapsed because your buyer pulled out, then you can sue your buyer but it also means your seller can also sue you. Its all a very complicated mess. Thats why everyone must be 1000% certain they are ready when it comes to exchanging.

drunkmonkey

astrofool wrote: »

Survey is usually done before contracts are sent out, usually they're scheduled immediately after going sale agreed

Would you pay for a survey in op's secnario considering what we know and the high likleyhood of the sale falling through. I wouldn't.
Wait until the seller is serious. There not until the contracts arrive.

Graham

OP, in the normal chain of events your deposit will be returned to you if the sale doesn't complete before contracts are signed. Talk to your solicitor who will run through the specifics for your purchase.

If your mortgage is 80% and you've already paid 10% booking deposit, keep your other 10% in the bank. I would expect you will need to transfer this to your solicitor around the same time as the mortgage is drawn down from your bank.

Personally, I would get a survey done sooner rather than later. You don't really want to spend weeks/months hanging around only to discover you don't want the house or you need to renegotiate the offer.

Ask your solicitor when you should sign contracts, also ask your solicitor if there's any way of including time limits on completion/signing contracts on the vendors side. You don't really want to sign contracts only to find out the vendors drag out signing for months while they try and find a new home.

Keep looking at alternative houses, at least up-to the point where you and the vendors have signed contracts.

lalababa

I don't quite understand the OP. Op is buying, seller is selling. Seller is hoping to buy another house. Then seller is motivated to sell. Not much of a chain there? If op was selling but buyer needed to sell their property before buying ops property then that would be a chain.
Also when deposit is down pre contract, unless specified deposit comes back if buyer pulls out. If deposit is still down post buyer signing contract, then buyer loses deposit if he pulls out, but doesn't lose deposit if seller pulls out. Nothing happens pre contract signing. That's what a contract is. Seller can't pull out after signing contract unless specifically written in contract, this is highly unusual and would be red flagged by buyers solicitor.

Dav010

drunkmonkey wrote: »

Would you pay for a survey in op's secnario considering what we know and the high likleyhood of the sale falling through. I wouldn't.
Wait until the seller is serious. There not until the contracts arrive.

Would you pay a solicitor without having a survey?

Assuming you have mortgage approval, the next step once bid is accepted is to get the survey done. Without this the bank will not loan the money and you may not want the property if the survey throws up major issues, you will have your solicitor working away on the conveyancing, only then to find that the bank won’t lend, you have wasted weeks, you have a survey fee, and a solicitors fee.

Your way doesn’t make a lot of sense. What the op has posted is a typical outside of new builds. If the op hadn’t done a survey within a week or two of the bid being accepted, I’d think they weren’t serious and I would be looking at going back to the underbidder.

drunkmonkey

Dav010 wrote: »

Would you pay a solicitor without having a survey?

Assuming you have mortgage approval, the next step once bid is accepted is to get the survey done. Without this the bank will not loan the money and you may not want the property if the survey throws up major issues, you will have your solicitor working away on the conveyancing, only then to find that the bank won’t lend, you have wasted weeks, you have a survey fee, and a solicitors fee.

Your way doesn’t make a lot of sense. What the op has posted is a typical outside of new builds.

I would do nothing that costs money in relation to this house until it's a clear sale. From what op wrote it's not a straightforward sale.
I definitely wouldn't be telling the solicitor to start conveyance work etc.
The OP asked about nightmare scenarios and yere walking him into one based on what we know.
Once he has an expected closing date then you can start spending but not until that bit is ironed out first.
I know people who've wasted money on surveys, hence trying to save op from wasting his money.

If I'm wrong it won't cost op anything.

Steveire

I'm not sure who of the repliers has read what I wrote. People are saying the usual stuff that gets said in every thread, eg "get a survey", and "you can get the booking deposit back". As I said in the OP, we'll get a survey and have a good solicitor. Also, I'm talking about after signing the contracts, so can't get the booking deposit back after doing that. Also, I'm talking about someone else causing a problem after the contracts are signed.

I'm looking for horror stories in response to "What can go wrong after contract signing if we do everything right and if there is nothing wrong with our house?".

I'm looking for how a mess can occur.

Eg, I wondered whether we would have to sue to get our deposit back after signing the contract if someone else in the chain collapses it (notice that I'm not saying booking deposit), or do we automatically get it back etc. Someone suggested we would automatically get it back in that case, but might sue for the other fees, so that sounds reasonable and realistic. You never know though with the laws in this country .

drunkmonkey

Nothing to really go wrong at that stage unless something was missed along the way. Your booking deposit comes off your deposit after contract signing.
You've a bit to go to get there if your waiting on the sellers to buy a new house.

Dav010

drunkmonkey wrote: »

I would do nothing that costs money in relation to this house until it's a clear sale. From what op wrote it's not a straightforward sale.
I definitely wouldn't be telling the solicitor to start conveyance work etc.
The OP asked about nightmare scenarios and yere walking him into one based on what we know.
Once he has an expected closing date then you can start spending but not until that bit is ironed out first.
I know people who've wasted money on surveys, hence trying to save op from wasting his money.

If I'm wrong it won't cost op anything.

A sale isn’t clear until the contracts are signed, up to that, all that is in place is a verbal agreement where both parties can pull out and deposits can be refunded.

But to get to that contract stage, you must first have your finance in place, you must have a survey to do this, and your solicitor will advise you to check the condition of the house by survey before you get into the legal procedures and fees.

If you don’t have a survey and inform your solicitor who then contacts the seller regarding any issues which can lead to changes/renegotiation in price prior to contract being written, why would the seller firstly sell to you, and secondly instruct their solicitor to draw up contract?

I can assure you, what the op is describing, and their apprehension as first time buyers, is normal. Sellers have to sell to buy, buyers often have to sell to buy, that is why first time buyers are second only to cash buyers as preferable buyers.

Graham

After you sign the contracts you are committed to buy. Should you fail to buy you could lose your deposit and/or find yourself on the receiving end of legal action to force you to complete the purchase.

Potential horror; the vendors don't sign the contracts for months leaving you in limbo. You committed to buy, but they are not committed to sell.
Potential horror, the whole thing drags on so long your mortgage offer expires.

Both of those risks can potentially be mitigated by your solicitor.

Dav010

Steveire wrote: »

I'm not sure who of the repliers has read what I wrote. People are saying the usual stuff that gets said in every thread, eg "get a survey", and "you can get the booking deposit back". As I said in the OP, we'll get a survey and have a good solicitor. Also, I'm talking about after signing the contracts, so can't get the booking deposit back after doing that. Also, I'm talking about someone else causing a problem after the contracts are signed.

I'm looking for horror stories in response to "What can go wrong after contract signing if we do everything right and if there is nothing wrong with our house?".

I'm looking for how a mess can occur.

Eg, I wondered whether we would have to sue to get our deposit back after signing the contract if someone else in the chain collapses it (notice that I'm not saying booking deposit), or do we automatically get it back etc. Someone suggested we would automatically get it back in that case, but might sue for the other fees, so that sounds reasonable and realistic. You never know though with the laws in this country .

It is simple enough, if you pull out after contracts are signed, you get penalised and probably lose your deposit. The EA does not keep that by the way, the vendor does as you broke the contract with them. That is used to pay the solicitor, EA etc. On the other hand, if the seller pulls out after the contract is signed, you can sue to force completion of the agreed contract/sale, or for damages for breech of contract.

Really this is something you should be discussing with your solicitor. Get the survey asap, the situation you are in is very common.

Steveire

Dav010 wrote: »

if the seller pulls out after the contract is signed, you can sue to force completion of the agreed contract/sale, or for damages for breech of contract.

Yes, this sounds like a mess. I would have to sue the seller to get my deposit back if they pull out? Sounds like suing would cost me (I'd have to pay a different solicitor/barrister who specializes in that instead of the one who specializes in conveyancing). But, I would sue for the deposit plus the cost of paying the legal fees to get it back from them?

And, if the party I'm buying from are not at fault, but the party they tried to buy from are at fault (ie, the people two or more hops away from me up the chain back out after contracts), then each party sues the next party up the chain until reaching the one at fault?

Dav010 wrote: »

Really this is something you should be discussing with your solicitor. Get the survey asap, the situation you are in is very common.

Yes, I will. I like to have some understanding of what I'm asking about though, so I do research on the internet. There is not a lot of info out there about this though. Perhaps that means that it doesn't happen often that sales fall through after contracts...

Dav010

It really isn’t a mess. Your solicitor will advise you about this. The breach of contract will be clear, they didn’t complete the contract as agreed.

If you don’t accept this as a risk, you will be ruling yourself out of buying a huge percentage of properties, you will be limited to new builds, vacant houses and properties where the sellers are not relying on the sale of their existing property to buy another.

As Graham said, the worst case scenario is likely to be the delay while the seller finds a new home.

theteal

Such a chain is fairly standard when it come to buying/selling houses. You will not lose your deposit if something was not your fault. The contract signing is towards then end of the process, you should have exchange dates planned when at this stage (the others involved will have their plans in place also). Your solicitor will handle all this.

Yes, sales fall through and it's a right pain, I've had this happen (we pulled out due to idiocy of the seller) and it's annoying having paid for surveys, searches and solicitors but that's all part of the racket.

Graham

You are overthinking this OP. You are starting a pretty normal house buying transaction like tens/hundreds of thousands of people before you.

In the event the sale falls through it is incredibly unlikely you would need to take legal action to recover the deposit. It would just be returned.

Talk to your solicitor.

Interested Observer

drunkmonkey wrote: »

Would you pay for a survey in op's secnario considering what we know and the high likleyhood of the sale falling through. I wouldn't.
Wait until the seller is serious. There not until the contracts arrive.

If the OP waits for contracts before the survey then they will have to pay the solicitor instead - which will be a hell of a lot more expensive than the survey. Telling the OP not to the survey done is straight up bad advice.

BrokenArrows

Graham wrote: »

Potential horror; the vendors don't sign the contracts for months leaving you in limbo. You committed to buy, but they are not committed to sell.
Potential horror, the whole thing drags on so long your mortgage offer expires.

That doesnt happen.

Both sides sign the contracts in their own time.

The solicitors "exchange" contracts by reading it out on the phone to each other to confirm both contracts are identical. It is after this exchange has taken place that both sides are legally obliged to proceed.

Marcusm

drunkmonkey wrote: »

I would do nothing that costs money in relation to this house until it's a clear sale. From what op wrote it's not a straightforward sale.
I definitely wouldn't be telling the solicitor to start conveyance work etc.
The OP asked about nightmare scenarios and yere walking him into one based on what we know.
Once he has an expected closing date then you can start spending but not until that bit is ironed out first.
I know people who've wasted money on surveys, hence trying to save op from wasting his money.

If I'm wrong it won't cost op anything.

In any decently busy part of the country your booking deposit would be returned and the seller would look for someone else. TheOP is the sellerof one house and buyer of another one. They are sale agreed, a status which is meaningless unless their purchaser has undertaken a survey. Likewise their own bid is valueless unless they are willing to proceed to undertake a survey, ie incur non-refundable costs which indicates their seriousness.

Marcusm

Graham wrote: »

OP, in the normal chain of events your deposit will be returned to you if the sale doesn't complete before contracts are signed. Talk to your solicitor who will run through the specifics for your purchase.

If your mortgage is 80% and you've already paid 10% booking deposit, keep your other 10% in the bank. I would expect you will need to transfer this to your solicitor around the same time as the mortgage is drawn down from your bank.

Personally, I would get a survey done sooner rather than later. You don't really want to spend weeks/months hanging around only to discover you don't want the house or you need to renegotiate the offer.

Ask your solicitor when you should sign contracts, also ask your solicitor if there's any way of including time limits on completion/signing contracts on the vendors side. You don't really want to sign contracts only to find out the vendors drag out signing for months while they try and find a need w home.

Keep looking at alternative houses, at least up-to the point where you and the vendors have signed contracts.

It would be a pretty cheap house where the “booking deposit” paid to the estate agent amounts to 10%. That 10% is the contract deposit paid to the vendor’s solicitor at exchange of contracts. The booking deposit might be €5-25k and rarely anymore.

SozBbz

I also think you're overthinking this OP.

Sale Agreeds fall through a lot (has happened to me x3) but almost always well in advance of signing. The only time your deposit is remotely at risk is if you signed the contract for sale but changed your mind. Contracts are not usually available to be signed until 2/3 months after survey, by which time both sets of solicitors would have been through them.

The scenario you outline in your OP is wild. It simply cannot happen. There is no scenario whereby someone else collapses the chain and you loose your deposit. You only risk losing it if you are the one to pull out after contracts are signed. Also, there is no scenario whereby an Estate Agent keeps a deposit, I don't know where that idea came from.

Go ahead and get he survey done. Its for your information really (although depending on the age of the property the bank may require sight of it). It might show up something awful that makes you want to pull out. If the house is defective, aren't you better to know that now than after incurring the conveyancing costs? A survey costs a few hundred Euro. Even if the sale were to fall through after the survey, if you can't afford to write off a few hundred Euro, can you really afford a house?

Steveire

SozBbz wrote: »

I also think you're overthinking this OP.

Sale Agreeds fall through a lot (has happened to me x3) but almost always well in advance of signing. The only time your deposit is remotely at risk is if you signed the contract for sale but changed your mind. Contracts are not usually available to be signed until 2/3 months after survey, by which time both sets of solicitors would have been through them.

The scenario you outline in your OP is wild. It simply cannot happen. There is no scenario whereby someone else collapses the chain and you loose your deposit. You only risk losing it if you are the one to pull out after contracts are signed. Also, there is no scenario whereby an Estate Agent keeps a deposit, I don't know where that idea came from.

Go ahead and get he survey done. Its for your information really (although depending on the age of the property the bank may require sight of it). It might show up something awful that makes you want to pull out. If the house is defective, aren't you better to know that now than after incurring the conveyancing costs? A survey costs a few hundred Euro. Even if the sale were to fall through after the survey, if you can't afford to write off a few hundred Euro, can you really afford a house?

Haha, don't worry, I've paid no attention to the poster saying to get the survey done after signing contracts .

I know I'm over-thinking it, especially as we are not sellers in the chain. We're only buyers.

But, I'm still curious what happens when there is a chain, and on June 1st they all sign contracts, and then on June 3rd someone can't sell and backs out.

* Alice is only selling and moving back to England to rent
* Bob is buying from Alice and selling his house
* Ciara is buying from Bob and selling her house
* Donal is buying from Ciara and is a FTB.

If Alice decides she can't sell for medical/family reasons, then Bob gets his deposit back. Bob also sues Alice to recoup solicitor etc costs up to that point I guess. Bob then breaks the agreement he has with Ciara through no fault of his own. Ciara is then entitled to get her deposit back. Maybe she also sues Bob to get her solicitor etc costs back? Same thing with Donal as Ciara broke the contract through no fault of her own.

Of course, this could possibly be resolved another way (such as Bob still selling his house and renting somewhere while finding a new place, or Bob finding an alternative house to buy quickly). However, unless something like that is done, Bob and Ciara are breaking contracts (through no fault of their own).

At this point, it's no more than a curiosity and I'll try to find out what happens in that case anyway. Maybe the solicitors just work something out, or they delay until Bob finds somewhere else to buy? I'm sure Bob, Ciara and Donal don't want the rest of the agreement falling through anyway, so I'm guessing they sort something out. Still though, I'd expect to be able to find some stories about this kind of thing.

SozBbz

Steveire wrote: »

Haha, don't worry, I've paid no attention to the poster saying to get the survey done after signing contracts .

I know I'm over-thinking it, especially as we are not sellers in the chain. We're only buyers.

But, I'm still curious what happens when there is a chain, and on June 1st they all sign contracts, and then on June 3rd someone can't sell and backs out.

* Alice is only selling and moving back to England to rent
* Bob is buying from Alice and selling his house
* Ciara is buying from Bob and selling her house
* Donal is buying from Ciara and is a FTB.

If Alice decides she can't sell for medical/family reasons, then Bob gets his deposit back. Bob also sues Alice to recoup solicitor etc costs up to that point I guess. Bob then breaks the agreement he has with Ciara through no fault of his own. Ciara is then entitled to get her deposit back. Maybe she also sues Bob to get her solicitor etc costs back? Same thing with Donal as Ciara broke the contract through no fault of her own.

Of course, this could possibly be resolved another way (such as Bob still selling his house and renting somewhere while finding a new place, or Bob finding an alternative house to buy quickly). However, unless something like that is done, Bob and Ciara are breaking contracts (through no fault of their own).

At this point, it's no more than a curiosity and I'll try to find out what happens in that case anyway. Maybe the solicitors just work something out, or they delay until Bob finds somewhere else to buy? I'm sure Bob, Ciara and Donal don't want the rest of the agreement falling through anyway, so I'm guessing they sort something out. Still though, I'd expect to be able to find some stories about this kind of thing.

What you're describing would all have to happen in a very short number of days, and IMO its not that realistic. Has it happened ever in the history of time? Probably, but not often enough to be worried about it. You'd be as well to spend your time worrying about getting hit by a bus.



House sales fall through during the sale agreed phase all the time. In that scenario, no matter who pulls out everyone gets their deposits returned to them. The risk of having wasted money on a survey/solicitor for a house the vendor no longer wishes to sell to you is real and theres nothing you can do about it. I had it happen to me. My best advice is to have a decent, reasonable solicitor who won't charge you the full whack based on the fact that I said I'd come back to him when I had a new property lined up (which I did).

Also, note solicitors will organise for signing sequentually all the way down the chain, so there wouldnt be people sueing each other left and right like your outlined, becuase if the chain falls apart right at the top, then the others wouldn't have signed. Then its just return deposits and walk away. Some people will be out of pocket, but not for any amount worth suing over (not that they could anyway).

These convoluted scenarios whereby you as a FTB (ie purchesor only) have no risk to your deposit thats outside of your control..... why would you even worry? You know at the point of signing (after months of back and forth most likely) that this is the point of no return. I signed and had my keys in my hands a few days later.

The risk if you want to look at it that way is that your vendor decides not to go through with the sale of their property for whatever reason and you'll have wasted your time, and some money on survey/valuation/solicitor. That risk is real and does happen, but its impossible to fully mitigate against IMO.