How to pay a deposit when buying a home

When do you pay a holding deposit?

If you decide to or agree to pay a holding deposit, it should normally be paid when your offer on a property is accepted. A holding deposit is not compulsory, so even if a seller or their real estate agent asks you to put a holding deposit in a contract, you do not have to do so.

How much is a deposit to hold a house?

How much you pay in a holding deposit varies according to negotiations between the seller and the buyer – except for in South Australia where it is capped at $100. If you do put down a holding deposit, be sure you get a written receipt from the real estate agent.

Is a holding deposit refundable?

A holding deposit is handed over before the official sale contract is signed – when you and the seller only have a verbal agreement. The upside of this is that if you change your mind about buying the home, the holding deposit should be fully refundable. The drawback is that without a signed contract, the seller is legally allowed to accept a higher offer from another buyer – something known as gazumping. If that happens, the holding deposit is fully refundable. So you should get the money back if someone else’s offer is accepted – though this can be slim consolation for missing out on a place you love.

Is a holding deposit part of the full price?

Yes, a holding deposit (if you decide to pay it) is part of the full sale price of a home and is considered part of the full or balance deposit (see above for more information). The role of the holding deposit is typically only used to show that an offer is serious, and that a buyer is keen to take the next step to sign the contract of sale. A holding deposit is not an extra cost on top of the home’s selling price.

How do I pay a holding deposit?

Typically, the holding deposit is paid via electronic bank transfer to the seller’s real estate agent, who holds the amount in a trust account (on the seller’s behalf). Some agents may prefer other payment methods, and it’s important to keep evidence of the transaction and to receive a written receipt. This is in case a refund is required, or if you are successful in securing the property (in which case you’d forward that receipt to your solicitor). You will most likely need to have proof that you have paid the holding deposit.

What is a full deposit on a real estate contract?

A full deposit on a real estate contract is a sum of money the buyer promises to give to the seller, usually via their agent or solicitor, to legally activate the sales process. It is also called a balance deposit, contract deposit or purchase deposit, and most often applies to private treaty sales. Once the full deposit is paid and any cooling-off period has passed, the buyer’s and seller’s solicitors work through the contract terms, with the goal of achieving settlement. The deposit is a portion of the total contracted sale price of the home.

How much is a deposit for a home?

When talking about the deposit written on a contract, how much it is depends on the outcome of negotiations between the buyer and the seller. Common amounts used in Australia can be up to 20% of the total sale price or even above. Some banks and lenders will grant you a home loan with a deposit of 10% or less, but it is likely this situation that you would need to pay lender’s mortgage insurance.

Both parties have to agree to the amount of deposit that is to be paid and sign a contract with the deposit listed on it, as well as the date it is to be paid, before it is considered to be legally binding.

It’s a good idea to keep in mind that a buyer could risk losing a portion of the deposit if they were to withdraw from a contract. It could be a good idea to consult a conveyancing solicitor if you do need to withdraw from a contract after you’ve signed it.

When do you pay a deposit on a home?

In a standard property sale, the home deposit has to be paid when you exchange the signed copies of the sale contract with the seller. If you buy at auction, you will typically sign the contract and pay a deposit on the spot. Once you have exchanged signed contracts and paid the deposit, the contract is legally binding, but you do not technically own the property yet.

The contracts can be swapped in person, via electronic delivery, or through the post, and it is usually handled by your solicitor, conveyancer, or real estate agent. The contract will include the deposit amount that the buyer and seller have agreed on.

Your home loan lender will also specify an amount that you must have in the bank for use as a home loan deposit, and this may be different to the amount your contract specifies you need to pay the seller. For example, your lender may require you to have 20% of the property value available as a deposit, even if the seller only asks for a deposit of 10% of the purchase price.

Is a deposit on a house purchase refundable?

Whether or not a house deposit is refundable depends on many factors, including: the size of the deposit, the conditions of a contract, at what stage the buyer or seller wishes to cancel the contract, and the “cooling-off” laws that apply in your state or territory.

It’s a good idea to consult a suitably qualified solicitor if you are considering entering into a property contract that you think may have a chance of crashing, or if you are considering withdrawing from a contract after it has been signed.

As a general rule, whether or not the buyer can get a refund on their full deposit depends on if the contract is conditional or unconditional:

• Unconditional contract: If the buyer pulls out of an unconditional contract after they pay the deposit, they are likely to forfeit a portion of the deposit during the cooling off period (apart from Northern Territory, where you are entitled to a full refund). Tasmania and Western Australia do not have cooling off periods. If a buyer wants to pull out of a contract after any cooling off period, it is possible that the entire deposit could be at risk. Most contracts for houses sold at auction in Australia are unconditional.
• Conditional contract: The cooling off rules apply to these contracts as well (providing the state or territory has one). These types of contracts have ‘conditions’ written into them which list circumstances under which the buyer or seller can pull out of the contract. This may include: if the buyer is not able to obtain enough finance, or the seller is not able to fix certain flaws discovered during the building, pest or pool inspection. Contracts for houses sold by private treaty will generally be conditional unless the buyer and seller agree otherwise.