Deposit & condition for Auction (or normal sale) in QLD?
- Thread starter kennyboi
- Start date
The vendor makes available a contract with the conditions of sale - including deposit - prior to the auction. If you want to bid on the basis of some variation to those conditions, you have to approach the auctioneer prior to the auction, and the vendor has the option of whether they want to accept bids from you on the basis of those conditions or not.
10% deposit is normal for an auction, and I've rarely seen anything different. Deposit for a private treaty (normal sale?) is more negotiable, usually 5-10%, but could be anything.
You can add almost any condition to a contract if both parties agree. You could have a condition that the vendor turn up at your house in a pink tutu and sing god save the Queen backwards if you both agree.
I've only ever put up deposits of $1000. Who has 10% of anything sitting around as spare cash? If the contract falls through and they sue you to recover costs I think the only difference between having paid a small or large deposit will be if you get money back or have to pay more.
I was told by an agent friend of mine that the reason agents want bigger deposits is so they can get paid as quickly as possible after settlement. I'd be happy to hear confirmation or denial of that from anyone here so I can shift it from the 'opinion' to the 'fact' column in my head.
When you're negotiating in a private treaty, you want to focus on getting the price, conditions and/or clauses that you want. If a smaller deposit is one of those than you need to ask for it but if the amount they are asking for isn't a problem then maybe put your efforts into reducing the price or adding favourable conditions to the contract.
You could the following scenario to any demand but I have had agents turn down my offer because of my low deposit policy only to call back the next day to accept. Of course by then their asking price is now too high for me or I want an extra month to settle.
I was told by an agent friend of mine that the reason agents want bigger deposits is so they can get paid as quickly as possible after settlement. I'd be happy to hear confirmation or denial of that from anyone here so I can shift it from the 'opinion' to the 'fact' column in my head.
When you're negotiating in a private treaty, you want to focus on getting the price, conditions and/or clauses that you want. If a smaller deposit is one of those than you need to ask for it but if the amount they are asking for isn't a problem then maybe put your efforts into reducing the price or adding favourable conditions to the contract.
You could the following scenario to any demand but I have had agents turn down my offer because of my low deposit policy only to call back the next day to accept. Of course by then their asking price is now too high for me or I want an extra month to settle.
If there is significant interest in the auction then it is likely to be 10%. Saying that we have had a couple of 5% on auctions through this week but they were for properties in the $1.2m plus range.
Clause 9 of the standard REIQ contract (attached) details the rights and remedies of each party in the case of fundamental breach. Amount of deposit at 5% or less does not alter this (5% is at least what it is going to cost you on a breach by the time you pay commission, marketing and legals etc). If your breach is not fundamental then you may get all of your deposit back.
If you breach a contract condition and the vendor terminates there are actually circumstances where a larger deposit could save you money. Eg, you have a $10k deposit, agree to release to vendor for your breach and do so by a deed stating that no further liability or obligation exists between the parties. You have a $1,000 deposit and breach a condition, vendor terminates and then starts an action to recover damages. The legal fees alone will be way more than $10k. (in latter situation best bet could be to offer to settle straight away and throw another $10k at them). Litigation is expensive, time consuming and has a huge opportunity cost. Avoid it wherever possible.
We have 2 matters in litigation at the moment over deposit forfeiture, termination and damages. Number 3 is about to hit formal litigation also. All of these are due to breach of contract or unlawful or ineffective termination by purchasers. If you have $50k in deposit at stake then litigation is questionable (settle for $25k each, take the money and run), $100k is probably worth it.
Clause 9 of the standard REIQ contract (attached) details the rights and remedies of each party in the case of fundamental breach. Amount of deposit at 5% or less does not alter this (5% is at least what it is going to cost you on a breach by the time you pay commission, marketing and legals etc). If your breach is not fundamental then you may get all of your deposit back.
If you breach a contract condition and the vendor terminates there are actually circumstances where a larger deposit could save you money. Eg, you have a $10k deposit, agree to release to vendor for your breach and do so by a deed stating that no further liability or obligation exists between the parties. You have a $1,000 deposit and breach a condition, vendor terminates and then starts an action to recover damages. The legal fees alone will be way more than $10k. (in latter situation best bet could be to offer to settle straight away and throw another $10k at them). Litigation is expensive, time consuming and has a huge opportunity cost. Avoid it wherever possible.
We have 2 matters in litigation at the moment over deposit forfeiture, termination and damages. Number 3 is about to hit formal litigation also. All of these are due to breach of contract or unlawful or ineffective termination by purchasers. If you have $50k in deposit at stake then litigation is questionable (settle for $25k each, take the money and run), $100k is probably worth it.
Depends on the individual matter and which solicitor is doing the briefing.
Happy to say Andrew Skoien for planning matters. He is an absolute gun and is outstanding to see on his feet. Pity he doesn't do other areas but P&E keeps him more than busy enough. P&E court uploads all the documents to e-courts anyway so anyone can see all our affidavits and applications etc anyway.
Don't like to name names in a public forum when we have matters on foot but happy to via PM.
I could give you some hints:
I rate a relatively new comer to the Bar who was formerly an advocate for a government legal practice and while skillful is affordable and still has calendar space to take on urgent matters, there is 5 year out or so female barrister who spent over a decade as a top tier litigator who is very good at working collaboratively through interesting advices, we use another one again for tax law and duties work.
I no longer run any litigation personally as my litigation SA runs that, though I do get kept well abreast of the matters and get to pick over some of the more interesting legal questions.
How about you?
Happy to say Andrew Skoien for planning matters. He is an absolute gun and is outstanding to see on his feet. Pity he doesn't do other areas but P&E keeps him more than busy enough. P&E court uploads all the documents to e-courts anyway so anyone can see all our affidavits and applications etc anyway.
Don't like to name names in a public forum when we have matters on foot but happy to via PM.
I could give you some hints:
I rate a relatively new comer to the Bar who was formerly an advocate for a government legal practice and while skillful is affordable and still has calendar space to take on urgent matters, there is 5 year out or so female barrister who spent over a decade as a top tier litigator who is very good at working collaboratively through interesting advices, we use another one again for tax law and duties work.
I no longer run any litigation personally as my litigation SA runs that, though I do get kept well abreast of the matters and get to pick over some of the more interesting legal questions.
How about you?
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