Every lender has their own terms and conditions, and this is intended only as a general guide to understanding this topic. Contact us to discuss your individual circumstances.
Once you sign a contract to purchase a property you will have to pay a deposit to commit to the transaction and to ensure that the property is taken off the market to any other offers.
A holding deposit may be payable if there are conditions still outstanding – like a finance clause, building inspection report etc. This is usually around $1000 or so. If any of the conditions are not met, then this holding deposit should be completely refundable to you.
Once the contract is Unconditional, then you will usually be required to pay 10% of the purchase price. This deposit is payable to the Real Estate Trust account, and is released on settlement day. It can be used to pay the Agent’s commission and on special application, the vendor can access it prior to settlement day.
Sometimes, you may not have the full 10% deposit – perhaps you only have 5% in savings or have not yet sold your current home.
Here are some alternatives that may be useful to you and your personal situation:
✓apply for a loan increase with your current lender to access the cash
✓sell & try to access the deposit paid by your purchasers (section 27 election)
✓apply for a deposit bond – example of the cost is about $840 for a $70,000 bond
✓negotiate with vendors of new property to pay less than 10% as a holding bond (eg $20,000)
✓wait until you have sold & settled your current home before signing an unconditional contract, or negotiate to pay the balance once your sale settlement has occurred
What about Auction deposits?
If you don’t know what price you will buy a property for – how do you have the deposit ready on the day – especially as most auctions are on the weekend!
Always discuss with the selling Real Estate Agent prior to the auction day to see what alternatives the vendors may be willing to accept in lieu of a 10% deposit on the day
One option may for you to take a cheque along for a substantial amount (say $50,000) with the promise to provide the balance on the first business day following the auction.