We often get asked from clients purchasing property about the 10% deposit. When does it have to be paid? I don’t have the full 10%, can I pay less? Can we use a deposit bond? In this week’s blog we answer all your questions about deposits and what needs to be paid.
When you find a property to purchase it is common for a holding deposit to be paid which may be a few hundred dollars. It can show the vendor (the seller) that you are serious about buying the property.
Full 10% Deposit
The full deposit is 10% of the agreed purchase price. This is payable on exchange of contracts. The deposit is held by the real estate agent until settlement. If there is no real estate agent then the money is held in the vendor’s solicitor’s trust account. The deposit can be paid by EFT or bank cheque. Any holding deposit paid is deducted.
Given Sydney property prices it can be common for purchasers not to have the full 10%. In these situations, the vendor can agree to accept a 5% deposit or another amount. You would need to pay 5% of the purchase price on exchange of contracts. There will be a special condition put into the contract about this. If the contract was terminated and the vendor was entitled to keep the 10% deposit you would need to pay the remaining 5% of the deposit.
Another option if a cash deposit is not readily available is a deposit bond. These are generally issued by a bank. The bank guarantees that the deposit will be paid to the vendor if you default. The banks charge a fee for issuing a deposit bond which is usually a percentage of the amount needed. On settlement the full 100% of the purchase price will need to be paid.
As you can see there are a few options when it comes to paying the deposit on the purchase of a property. To use a deposit bond or a deposit less than 10% the agreement of the vendor is needed. Sharpe Legal and Conveyancing can provide you with advice on the deposit. We can also negotiate on your behalf for a reduced deposit or for a deposit to be used. Call us today for advice on (02) 4605 1501.
The contents of this publication is for reference purposes only and should not be relied upon as legal advice. Hence specific legal advice should always be sought to take into account your individual circumstances.