When you agree to buy a property, the purchaser is required to pay a deposit. Generally, this is 10% of the purchase price. In most cases, the funds are held in the vendor’s real estate agent’s trust account. And, in most cases, the deposit sits in the agent’s trust account until settlement is completed and does not earn the purchaser any interest.
Paying the deposit quickly once your offer has been accepted is a sign of good faith. However, it does not “hold” the property for you. You still need to exchange contracts.
What happens if I don’t pay my deposit on time?
It happens rarely, but there is the instance where payment has been delayed, or sometimes not paid at all.
Under the standard terms of the contract for sale, the 10% deposit MUST be paid either before or at the time contracts are exchanged. This is an essential term of the standard contract for sale. Special conditions, by agreement with the vendor, may be included in the contract to vary this standard provision.
If a purchaser does not pay the money to the deposit holder (normally the vendor’s real estate agent) when required, they will be in default of their obligations under the terms of the contract.
When a purchaser is in default under the contract a vendor gains certain rights including termination of the contract. If the vendor has the right to terminate the contract, then they may also have the right to pursue the purchaser for 10% of the purchase price (ie. the 10%). The vendor may also have other rights they can pursue against the purchaser.
Our advice? If you are planning to purchase a property, have your deposit ready to go and don’t delay paying it to the agent.
If you are relying on financing, you may need to arrange for a deposit bond in order to secure the 10%. Please ensure that you have the vendor’s approval firstly to use a bond as some vendor’s, for example some developers, may not accept them.
If you can’t pay your deposit on time or at all, please call us to discuss your options as soon as you are aware of the situation. In this instance, as your conveyancer, we may be able to negotiate an extension of time for you to pay the deposit and keep you from defaulting under the terms of the contract.