Payment of Deposit – Contract for Sale of Land
It is a general rule that the buyer has to pay a deposit for the property. If the buyer fails to pay the deposit, the seller may not proceed with the sale of the property. This is to protect the interest of the seller, as when the buyer agrees to purchase a property, it has to be taken off the market.
If the buyer cannot perform the contract later on, the seller may recover any amount forfeited from the deposit.
Amount of the deposit
The deposit amount is generally ten percent (10%) of the purchase price. The amount for the deposit can usually be negotiated between the vendor and purchaser and may be reduced to five percent (5%). A Property Lawyer or Sydney Conveyancer can assist you with negotiating the deposit amount.
If a purchaser does not have sufficient funds to pay the deposit, it is important for the buyer to pre-arrange the loan so that the deposit can be paid. For example, John has savings to cover 5% and will need to obtain a loan for the remaining 5% deposit.
For first-time buyers of property in Sydney, it is helpful that they hire a property lawyer in Sydney who specializes in conveyancing.
Forms of the deposit
The deposit is usually non-refundable. If a real estate agent is involved in the transaction, the deposit is paid to this Sydney agent who put the deposit into a trust account, which usually does not receives interests. The real estate agent may accept payment of deposit by electronic funds transfer (EFT), direct bank deposit, personal bank cheque or bank cheque.
In some circumstances, deposits can be held in a bank account that can generate interest. If this is the case, buyers should ask their Property Lawyer to negotiate with the seller for ways to share the interest received. In Sydney, conveyancing lawyers are experienced with this kind of negotiation.
In some cases, the buyer does not have the cash to pay the deposit. If the seller agrees, the buyer can make a deposit with a deposit bond, which is basically a guarantee that the underwriter of the bond will pay the deposit to the seller in circumstances where the deposit would be forfeited.
Many buyers who purchase “off the plan” Sydney properties use deposit bonds so that their money will not be tied up.
Releasing the deposit
Upon the settlement of the contract, the buyer pays the balance of the purchase price to the seller. Once the agent, who is holding the deposit, receives confirmation from both parties that the contract has been settled, the deposit is released to the seller.
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