Who Pays Deposit on Exchange of Contracts

When it comes to purchasing a property, exchange of contracts is one of the most critical steps. It`s the point where both the buyer and the seller are committed to the transaction and legally bound to follow through. One of the common questions that arise during this stage is who pays the deposit on exchange of contracts.

In a property sale, the deposit is typically 10% of the purchase price. It`s a gesture of good faith from the buyer and serves as security for the seller in case the sale falls through. In most cases, the deposit is paid by the buyer, but there are some exceptions to this rule.

Firstly, if the property is being purchased with the help of a mortgage, the lender may pay the deposit on behalf of the buyer. This usually happens when the buyer is unable to provide the deposit from their own funds or the lender wants to secure the investment. However, it’s important to note that the buyer is still responsible for repaying the deposit to the lender.

Secondly, if the seller agrees to a lower deposit amount or no deposit at all, the buyer may not have to pay a deposit on exchange of contracts. This is usually negotiated during the offer stage and is more common in cases where the sale is progressing quickly, and both parties are keen to proceed.

Lastly, in some cases, the seller may agree to pay the deposit on behalf of the buyer. This is not a common scenario, and it usually happens when the seller is eager to close the transaction and wants to make it more attractive to the buyer. It`s important to note that this is a rare occurrence, and buyers should not assume that the seller will agree to pay the deposit.

In conclusion, who pays the deposit on exchange of contracts depends on a variety of factors, including the terms agreed upon during the negotiation process. Generally, it is the buyer`s responsibility to pay the deposit, but there are situations where lenders, sellers, or no deposit at all could be in play. Buyers must ensure they have the necessary funds available to pay the deposit on or before the day of exchange to avoid any delays or legal issues.