Can I sell my home to a buyer with 5% deposit?

If you have your house on the market, you are selling at a time where  property prices and mortgages are high, buyers will need to offer a deposit to purchase, but the current market conditions mean it is uncommon that a buyer will have a 10% deposit. However, the Contract for Sale of Land stipulates that a 10% deposit must be paid on exchange of Contracts. So this leads many people to question " Can I sell my house to a buyer with a 5% deposit? " and if so, how is this done? and is there any risk? The simple answer is yes you can and yes it does come with a risk, but there are ways to minimise the risk.

You can accept any deposit you wish under the Contract for Sale as long as it is agreed to by all parties, but here is the catch…

  • If you agree to accept a 5% deposit and if you ever had to terminate the Contract on your buyer, then you would have to try and recover the balance of the 5% due to you under the Contract. This would be done through litigation (going to court), which is an expensive process with no guaranteed outcome.
  • If you do not feel comfortable agreeing to a 5% cash deposit, you can always ask your buyer to obtain a 10% deposit bond. A Deposit Bond acts as a substitute for the cash deposit between signing a Contract and settlement of a property. At settlement the purchaser would then pay the full purchase price including the deposit. A Deposit Bond can be issued for all or part of the deposit amount required, up to 10% of the purchase price.

Thus, it is safer to ask for a 5% cash deposit together with a 5% deposit bond, which would total your whole 10% deposit.

Ideally, it is up to you whether you agree to accept a 5% deposit, just remember that it does come at a risk. Even though you are lead to believe it is “common practice” you are entitled to the 10% deposit under the Contract for Sale, you do not need to accept the 5% even if there is a “special condition in the Contract” as if you do accept the lesser deposit,  that is most likely all you will get if the Contract is terminated.

If you are thinking of selling your property you will need a contract of sale before you market your property. This can be done by a licensed conveyancer. Contact Coutts Solicitors & Conveyancers.