Hi Mustachians,
I am interested in a house that is for sale, but the owners need to sell it quickly and want a 10% deposit. Ideally, I would like to sell my apartment first and then pay the 10% deposit on the house, but the timing has been quite difficult. Would you risk paying 10% before selling with an 18 months timeline, for example?
Thanks!
10% deposit as a reservation payment? Or when signing the conract?
Signing at the notary’s office.
You mean that you only need to pay 10% and they will wait for you to sell your apartment before you have to pay the rest?!
I have to pay 10% at the notary’s office to sign, and I have 18 months to complete the purchase; otherwise, I’ll lose the 10%. While I am optimistic that my apartment will sell for a good price, there is always a risk that the bank will not grant a loan unless it sells for a certain price.
I don’t care about the size of your deposit or your situation with the bank
The only question that is relevant here is how much of a discount you negotiate
“I need it to sell quickly” apartments should be priced as such
WTF? What kind of contract is that?
This is probably legal if it is part of a properly notarised purchase or preliminary contract. A 10% deposit is not unusual, but I would not pay it unconditionally if the financing depends on selling the current flat. Make sure the money remains in the notary’s escrow account and that the contract clearly states it is refunded if the apartment cannot be sold by an agreed deadline or if the required mortgage is not approved. Otherwise, if you cannot complete after 18 months, you may lose the 10% and could potentially face further claims depending on the wording of the contract.
There may also be a way to avoid selling first: ask the bank about a Zwischenfinanzierung / bridge loan. The bank can use the existing apartment, and sometimes the new property as well, as security so that you can temporarily own both while marketing the old one. The key question is whether you pass the bank’s affordability calculation for the combined financing and whether it accepts the expected sale value and an 18‑month sales deadline. These arrangements are very individual and often shorter-term, so I would get a binding financing confirmation before signing anything that makes the 10% non-refundable.
The money will stay in the notary’s escrow account, however the seller do not accept a return. They are worried that I might change my mind about the purchase and shop elsewhere. We only talked with UBS, they are demanding a sale for at least 1.2M which is exactly the price we’re asking for.
Sounds a bit unconventional, but fair. They want to sell now, or need some money now. Why would they wait 18 months for you if there are other takers in the meantime, incl. the risk of you walking away?
Have you talked to a bank, how or what they’d finance? I mean for the case where your apartment sales takes longer?
Yes, they might buy an apartment, but they also need to put down a 10% deposit. They have changed their minds several times — first they wanted to rent, and now they want to buy — and they are not very clear about their intentions. I hope that with the start of the school year, there will be more visitors to the apartment; so far, there hasn’t been much interest, this is what worries me the most.
Don’t forget that you have a timeline for Ersatzbeschaffung / replacement purchases, so as to defer Grundstueckgewinnsteuer / property gains taxes
That’s also my biggest question in this whole deal. ‘wanting to sell quickly’ and ‘wait for max. 18 months’ doesn’t go together for me. The risk of walking away is probably quite low, considering the potential loss of the 10% deposit.
Presumably for the 10% you get exclusive right of purchase for these 18 months.
I think the main thing is that you get your mortgage sorted out first so that you can close on the deal regardless of whether your flat sells. Then you have as much time as you like to sell your flat or keep it as a rental.
If you cannot get a mortgage, or handle both properties at once then this would be too risky for me.
Yes, the risk of walking away is simply losing this house and having to find another one. There are always other opportunities, but lately, the ones I have visited are not that interesting. But 10% is huge.
That is correct: 10% will get an exclusive right of purchase for 18 months.
I can get the mortgage; I’m just worried that the bank requires me to sell for a certain price, which I can’t do and that may require putting more cash.
Sorry, I might have missed this. But why would the bank force you to sell at a certain price? As long as the bank gets its mortgage money back, they would have no reason to worry about your purchase price.
UBS is being quite strict; I assume it’s because I don’t have enough cash, the difference between the two properties is 300k.
How about NOT signing that agreement and focussing on selling your place first. Assuming that works, you can go back to the owners of the place you want to buy and indicate you’re ready to execute now with zero risk of you pulling out (this should perhaps even result in a price reduction).
By that time the place could be sold already and then OP is left with none of the two.