Pre-contract deposits on property sales - Good / Bad?

[mysticmark]

Hi,

What are people's thoughts of asking for a 1/2K early deposit from a potential buyer?

How often is this used? What kind of % of sales use this?

It reserves the property for the buyer with the agent.

If the seller pulls out they get their money back.

If the survey makes property unmortgagable or in need of major work (over 10K say), they can get their money back and pull out.

If the buyer goes ahead it comes off the agreed price.

As a seller receiving an offer, it seems like a big sign of seriousness to buy and the best guarantee against being gazundered.

Within last few years it's become more mainstream I've read.

Are many agents reluctant? For selfish or for good reasons?

What % of sales use this system?

Pros n Cons?

[SpringTime]

In England and Wales a very low percentage of transactions involve these deposits as they undermine and are contrary to several of The Property Ombudsman's guidelines

[mysticmark]

1) I heard from a conveyancer that she has done several such pre-contract deposits recently.

2) Your comment isn't backed up here on The Property Ombudsman website:

https://www.tpos.co.uk/news-media-and-press-releases/press-releases/item/pre-contract-holding-deposits#:~:text=Accordingly%2C%20if%20an%20agent%20is,or%20retained%20by%20the%20seller.

[SpringTime]

1. A conveyancer once said something about some things.

2. If you were a seller don't you think you'd be interested in a previous viewer's tardy offer whether it was higher or lower than your currently agreed transaction? If it was a little higher then maybe you'd just be honourable and proceed as you are... but what if it was £50k higher - wouldn't you want to know so that you could potentially jump ships? Is a deposit really even relevant in that case?

Say you're the buyer who's offering "x amount" more. Isn't the fact that the vendor's locked themselves in with another buyer a frustration?

The Ombudsman's guidelines remove the need for such early deposits. Agents can help too. All there on TPO website.

Hope that helps!

Or we could work with the enviable Scottish system using missives... or we could also have vendors split stamp duty with buyers.

Any opinions folks?

;-)

[SpringTime]

PS I have experienced many such scenarios and as a whole they'd be seen as doing overwhelmingly more bad than good. Very often the transaction falls apart, the seller's agent is sacked, and both buyers and sellers end up blaming not just the agent, but the other party. Additional and totally unnecessary legal costs start to soar as both parties try to claim the deposit.

Seriously AVOID

[OutOfFocus]

Over 30 years ago so a large spoon of salt.

We bought a house through White dent (predecessor of hindwood whatever) who were rather old skool. After a number of weeks they wrote asking if we might care to leave a deposit. Reply - already exchanged.

The seller was a solicitor so things ripped through in record time. No chain our side.