Deposit when you submit an offer

[Bangers]

Hi,

Can anyone please confirm, what's the exact reason to include a ~$10,000[+] deposit when you submit an offer to a vendor, via an agent?

I'm fairly confident it guarantees the Real Estate there commision. ie. Cases where the property has been sold, moneys transferred directly from buyer to seller, then the RE has to chase up (possibly even via the courts) to obtain there commission (in my case, 0.25*$330k = $8250).

They seem to get really shitty (unless, I just happen to had to deal with ex-used car salesmen turned real estate agent) when you put your foot down and only offer $1000 with the offer.

Matt

 

[TheCamel]

generally, i don't beleive the REA is able to touch the deposit... nor can the vendor..

 

[JamesGG]

Hiya,

The reason they ask for 10% is so that there are secure funds available should you renege on settlement. It also means that if the vendor submits a S27 (in Vic), the deposit can be released early, paying the agent's commission and allowing the vendor to use those funds towards their next purchase.

However, there is no law (again, in Vic) that says 10% is needed. I put $1,000 upon signing for my last purchase, and not a cent more until settlement.

Agents must present all offers, unless they have specific instructions otherwise. So, remind the agent of this, and offer what you like. That doesn't mean it's going to be accepted, though...

Cheers

James.

 

[HeXa]

in the ACT I have only ever made $1000 deposits when making offers (goes into the RE trust fund).. but then we don't make the offer on the contract itself... the typical 10% for exchange comes later (though irrc, there is no legal requirement for any deposit when signing a contract).

 

[Bangers]

Agents must present all offers, unless they have specific instructions otherwise. So, remind the agent of this, and offer what you like. That doesn't mean it's going to be accepted, though...

Thanks James. That was going to be my next question, I've only put 2 offers that failed (b/p, and vendor removed sale) and both times the RE was extremely argumentative regarding the deposit I put down.

A simple "I'd like to put down $1000" isn't enough to both the REA's I've dealt with (that's 100% of my dealings with them remember!) and apparently I should consult my parents/relatives etc for additional funds (this is where I had to laugh, specially considering they didn't know my financial state).

Is there anything else I can I say if they get pushy? But I'll definately try the 'no, it's staying at $1000, and last time I checked agents must present all offers'.

Matt

 

[outbackjack]

Last two propeties I havent put any deposit down. I explained that I was using equity from current properties.

Last deal REA said she doesnt know how that works, she went to the dealer principle to get it explained to her.

She came back and said it would be ok.

Others will be more wise than me , but I think it makes the REA feel warm and fizzy and that deal is real.

 

[Medine]

Hi Matt,

Everything is negotiable. How much you pay for deposits, when you pay it, payment in installments, length of settlement, access prior to settlement.....etc etc.

I'm a big fan of the low deposit, but I agree with Outbackjack that it makes the agent feel secure about the sale and maybe to close your purchase, so I usually offer $5,000.

Having said that I recently paid a 10% deposit. We wanted the house. The vendors wanted early access to the deposit to put a deposit on another house. We negotiated longer settlement in return for the deposit. Everyone was happy

Cheers, Medine

 

[EstatePreneur]

I paid 5% deposit of the purchase price here for my PPOR. But initially, the REA only asked $1000 deposit from me upon signing of the contract by the vendor.
The REA even was only asking $500, and then asked $1000.

 

[joeygbh]

I know I paid only $500 for deposit on offer on the last two properties bought, one last month and one this week. Both times the agent was more than happy with it. They don't want you messing them around with unrealistic offers but certainly if its only an offer stage they can't ask more than that. If they ask for say 10% or so, will they be willing to pay the interest on that if they accept another offer?

 

[WillG]

There is no legal requirement to leave any money until the contracts are exchanged. Any money left before this time is purely to show you are serious. I left no $$'s on my last transaction.

I always negotiate the amount I leave at exchange of contracts - usually 5% although I will have to cough up 10% if I back out after exchange of contracts.

Everything is negotiable including settlement date and every term in the contract.

 

[Kevin Hockey]

Most buyers I have dealt with over the last 12 months have wanted to offer a deposit of $1000 and most owners have spat the dummy and insisted on a minimum of $5000. I've seen some big barney's over this such as one which didn't proceed even though all other conditions were accepted. Both took the "moral" high ground.

Most owners feel that for such a small deposit the buyer will easily change their mind and risk losing such a token amount. They want a commitment from the buyer in good faith. You'd be surprised just how many owners have been stung by accepting small deposits.

It is true some agents will be looking to cover their commission in fees. This is about business cashflow. An agency has the property on their books for sale for a certain amount of days. Brisbane average is supposed to be 71 days at the moment (which I find hard to believe), my office is 32.6 days, then you have to wait another 30-60 days for settlement. Waiting for the solicitor to process the cheque for another week just blows out the cashflow further so most agencies prefer to have it covered. With Go Gecko the deposit is held by the sellers solicitor so it's irrelevant to us.

Kev
www.gogecko.com.au

 

[Alanna]

It can be very difficult to hold onto a deposit, even if the buyer renegs on the contract. A large deposit can show a vendor that you are very serious about the purchase, particularly if you have a number of contractural conditions that might otherwise make the contract shaky in the eyes of the vendor.
That said, however, it is very very difficult to get people to hand over a larger deposit than $1000.
The REA does not have access to the deposit, it must be lodged in the trust account. REA commission does not work like this - funds for agency commission are deducted from monies upon settlement and it is then up to the agency to work out the commission percentage due to individual sales people and make the cheque out accordingly (percentages differ based on type of sale etc and timeframes differ according to individual agencies).
Hope that makes sense....

 

[Les]

G'day Bangers,

I'm going to attempt to answer your original question, as I understand it:-

Can anyone please confirm, what's the exact reason to include a ~$10,000[+] deposit when you submit an offer to a vendor, via an agent?

When you submit an offer, this is usually in hopes of "going to Contract" on acceptance. In Qld at least, your offer will be written up as a Contract - maybe not so in other States.

As I understand it (and I could be wrong) a contract requires THREE parts to be valid:-
1. An offer
2. Acceptance of the offer
3. A "consideration". (which basically means "money changes hands")

I have presented offers with $20 as a consideration. The "deposit" is something else, and might be paid within xx days after Contract Date, or upon settlement - this is open to negotiation.

So, to answer your question, I don't believe there is ANY reason to include a $10k deposit at the time of making an offer,

Regards,