We are mad keen on this house and signed for it – but when is it ours?
Even if you do the deal and shake hands with the selling agent and he takes a payment off you for €5,000 booking deposit, telling you the contracts will be on their way to your solicitor very soon, those welcome words are worth almost nothing as a binding contract only comes into existence when both vendor and purchaser have signed the contracts and they have been exchanged between the parties.
When the purchaser is asked into his solicitor’s office to look over all the contract documents and actually does sign them there and then and without inserting any loan approval or other conditions- does that make the arrangements binding? No it does not. When the signed contracts are delivered to the vendor solicitors offices along with a big cheque for say €30,000 being the full deposit, is there a binding contract now in place? No there is not and both the vendor and indeed the purchaser can walk away at this stage.
Only when the already signed contracts are also signed (unconditionally) by the vendor and returned to the purchaser’s solicitor does a binding contract arise.
This state of affairs is less than ideal and can create a situation where the vendor may retain the contracts unsigned by him and try squeeze a higher price out of the hapless purchaser by indicating he has received a better offer from a third party. Or he may jettison the purchaser altogether and strike a deal with a completely different purchaser who offers more. This is known as gazumping. But remember if the market is sluggish, it can work for a purchaser too. Before a binding contract comes in to play, a purchaser might discover the roof or chimney needs serious repair and hold out for a pro rata reduction on the sale price before he signs the contracts. This is known as gazundering !
All of this comes to an end when the contracts are signed and exchanged between the parties and no further changes whatsoever are allowed to the contracts. The size of a deposit is actually irrelevant. Even a huge deposit will not commit the parties until those contracts are signed by everyone and exchanged.