The Risks of Proceeding Without a 10% Deposit on Exchange
In a standard property transaction, the buyer is expected to pay a 10% deposit on exchange of contracts. This deposit is not just a formality—it plays a crucial role in protecting the seller and ensuring both parties are committed to the transaction.
However, in some cases, buyers may request to proceed with a reduced deposit—or no deposit at all. While this may seem like a reasonable accommodation to keep a deal moving, it can expose sellers to significant risks.
Here’s what you need to know before agreeing to proceed without the full 10% exchange deposit.
Why the 10% Deposit Matters
The exchange deposit serves two key purposes:
• Security – It provides the seller with financial protection if the buyer fails to complete
• Commitment – It demonstrates that the buyer is serious and financially prepared to proceed
Without it, the balance of risk shifts heavily in favour of the buyer.
What Happens If the Buyer Defaults?
If a buyer fails to complete after exchange, the seller is typically entitled to:
• Retain the deposit
• Potentially pursue further losses
But this protection is significantly weakened if a reduced deposit has been accepted.
The Key Risks for Sellers
1. Limited Financial Protection
If the buyer only pays a small deposit (for example, 5% or less), that is all the seller automatically holds if the buyer pulls out. This may not come close to covering:
• Loss in property value on resale
• Additional legal and agent fees
• Ongoing mortgage and holding costs
2. Difficulty Recovering the Shortfall
Although the contract may still state that 10% is payable, recovering the remaining balance from a defaulting buyer is not always straightforward. It can involve:
• Time-consuming legal action
• Additional costs
• Uncertainty of recovery, especially if the buyer lacks funds
3. Increased Risk of Buyer Withdrawal
A lower deposit can reduce the buyer’s financial commitment, making it easier for them to walk away from the transaction.
4. Chain Vulnerability
If your sale is part of a property chain, a buyer defaulting with little financial consequence can cause the entire chain to collapse—impacting multiple transactions.
Why Do Buyers Request a Reduced Deposit?
Common reasons include:
• Funds tied up in another property
• High loan-to-value mortgages
• Cash flow timing issues
While these may be understandable, they do not reduce the risk to the seller.
Can You Still Proceed Safely?
In some situations, agreeing to a reduced deposit may be necessary to keep a transaction alive—but it should never be done without fully understanding the risks.
Every transaction is different, but one principle remains constant: the exchange deposit is your primary protection as a seller.
Final Thoughts
It can be tempting to agree to a lower deposit to avoid delays or keep a buyer on board—but doing so without proper consideration can leave you exposed if things go wrong.
Legal Executive
Stefonie O’Marra joined the firm in November 2021 and works in our Saffron Walden office. She is a Fellow of the Chartered Institute of Legal Executives and has over 21 years legal experience and over 8 years’ experience in Residential Conveyancing. Stefonie is able to assist clients in all aspects of residential conveyancing including sales and purchases of both freehold and leasehold; new builds, shared ownership and help to buy; equity transfer and equity release; re-mortgages; lease extensions; right to buy purchases; land purchases and first registrations.
Hobbies and Interests: When she is not working Stefonie enjoys the gym. She loves musical theatre and music concerts, and watching rugby.
