Have you got the opportunity to offer an exclusivity deposit? Do you want to avoid being Gazumped? Is your agent set up in order to do this?
Paying exclusivity for a property could save you countless wasted hours, money and the heartache of losing out on your dream property even after your offer has been accepted. It also means you might not have to increase your offer higher than other buyers to get it accepted.
What is an exclusivity deposit in a house transaction?
An exclusivity deposit is paid by the buyer as soon as their offer is accepted on a property. It forms part of their offer and gives the following benefits:
- Gives the buyer a higher chance of having their offer accepted.
- Gives the buyer an exclusive timeframe to purchase the property.
- It Means the property is taken off the market immediately instead of having to wait for the memorandum of sale to be issued.
- Stops the vendor from being able to accept any other offers on the property within a pre-agreed timeframe.
- Prevents the buyer from dropping their offer at the last minute in a practise known as ‘gazundering‘.
How does it work?
Some agents will ask you if you would like to offer an exclusivity deposit along with your offer. Let’s say for example you made an offer of £100,000 for a property, there are also 2 other unknown offers put forward to the vendor at the same time. If you decide to offer exclusivity, this will be submitted in writing to the vendor along with your position and the other buyer’s positions.
The other buyers may have higher offers than yours. However, as you are prepared to pay an exclusivity deposit, they may be much more likely to accept your offer, over the higher offers, as you are shown to be a much more serious buyer. Meaning you can secure the property for a better price, without having to increase your offer.
If your offer is accepted, the agent will ask you to make payment for the deposit into their secure client account, which will hold the money until either completion takes place or the exclusivity period comes to an end.
Paying the deposit enters the buyer and the seller into a legally binding contract, meaning the seller can no longer entertain or negotiate any more offers on the property.
The agent will take the property listing down (or mark it as SSTC/reserved) and stop doing any viewings on the property. Providing you can complete the transaction within the pre-agreed timeframe the deposit just goes towards the purchase price that you have offered.
Want to sell securely?
SmoothSale offers an exclusivity deposit with every house that we sell.
Is it required?
An exclusivity deposit is not required and is completely optional. In our experience it’s highly recommended. We have seen vendors accept offers thousands of pounds less purely because a buyer was prepared to pay exclusivity.
We have also seen and had to break the horrific news to buyers, that after spending money on legal fees, visiting the property multiple times, and telling and showing all their friends and families about their new property. That they lose out on it, only to another buyer who comes forward at a later date, and offers the vendor a better price for the property.
Exclusivity deposit case study
The property was being sold on the open market for offers over £80,000. The property had a huge amount of interest and had around 20 viewings carried out.
From the 20 viewings 4 prospective buyers put forward offers:
- £75,000 – Mortgage, first-time buyer, £2500 exclusivity deposit
- £80,000 – Mortgage, investor, No deposit
- £81,000 – Mortgage, first-time buyer, no deposit
- £70,000 – Cash buyer, investor, no deposit
The vendor opted to accept the offer from buyer number 1, as although it was £6,000 less than the highest offer and £5000 less than an investor’s offer, as they were not prepared to pay exclusivity.
The seller felt most comfortable with buyer 1, as they showed commitment at the time of offering. The offer was accepted, the buyer paid the exclusivity deposit. The following day, buyer 2 then decided to up their offer to £83,500 which the vendor was now unable to accept, as the exclusivity contract had already begun with buyer 1.
Is my money safe?
There are a few things we would recommend checking before paying an exclusivity deposit:
- Do you definitely want to buy the property?
- Where is the money being held?
- Is the person holding it regulated?
Before offering to pay an exclusivity deposit, make sure you are 100% happy with the property you are offering on. Is it the right property for you? If you change your mind, you could lose some or all of your deposit.
SmoothSale offers an exclusivity deposit scheme. We hold the funds in a secure designated client account, which is separate from the business account. We are also regulated by The Property Ombudsman and adhere to their code of conduct
Are Estate Agent Exclusivity Deposits Refundable?
Yes, estate agent exclusivity deposits are often refundable based on the terms agreed upon. If the exclusivity period expires without a successful transaction, the deposit is typically returned to the buyer. However, specifics can vary, so it’s crucial to understand the terms before committing.
Can I Work with Multiple Estate Agents Simultaneously?
While it’s possible to work with multiple estate agents simultaneously, it can lead to confusion and inefficiency. An exclusivity deposit ensures focused efforts from a single agent, streamlining the property search process.
What Happens if I Find a Property Myself?
If you find a property on your own during the exclusivity period, it’s essential to communicate with your chosen estate agent. They can advise you on how to proceed and whether the property aligns with your objectives.
Is the Deposit Deducted From the Property Purchase Price?
In many cases, the estate agent exclusivity deposit is deducted from the final property purchase price. However, the specifics should be outlined clearly in the agreement to avoid any misunderstandings.
Can I Change My Mind During the Exclusivity Period?
Yes, buyers can change their minds during the exclusivity period. If you decide not to pursue a property or wish to discontinue the exclusivity agreement, it’s crucial to communicate your intentions to the estate agent promptly.
How Does the Deposit Affect the Overall Buying Budget?
The deposit amount varies and is often a percentage of the property’s anticipated purchase price. It’s essential to factor in this deposit when planning your overall budget for buying a property.