Early release of deposit ?

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From: Anonymous


Just purchased a property for $400K and now the seller wants early access to my deposit ?
Have 3 months to go on settlement.

Should I say yes or no ?
What are my legal rights ?
What is my risk ?

Regards

Stan
 
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Reply: 1
From: Ross Sneddon


Hi anonymous

Be cautious. If there is nothing in the contract for sale requiring you to release the deposit, don't.
Why does the seller want the deposit?
Is the seller an individual or a company, builder or developer?
If the seller is an individual and needs the deposit him/herself to secure a purchase, there are several ways to satisfy this position. Solicitors letter, deposit bond, Bank letter etc.,
Three months is a long time for a settlement. Is there a reason?
So many questions.
Will the seller complete their end of the deal if they get the deposit or will they slow the process down and then stop you from gaining access.

My best advice is to discuss it with your solicitor who should be experienced in property conveyancing.

Regards

Ross
 
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Reply: 2
From: Manny B


Hi Stan,

I have released deposits in the past ONLY when the seller has good equity in the property (ie. +50%), as the deposit normally sits in a trust & according to my solicitor (you may want to ask your solicitor as well to play it safe, as they know what equity they have in the property), as the vendor has good equity, there is nothing to worry about...

Note: this keeps the vendor happy & can possibly give you access to do things he/she may not have otherwise permitted you to do... (ie. agree to release the deposit if they give you access to the site on w/ends to splash some exterior paint, cut down trees, get tradies through the house for quotes, etc.), it has worked for me...

Cheers,

MannyB.
 
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Reply: 1.1
From: Owen .


Here's another related question I've been wondering about for a while. If I sell a property privately, what do I do with the deposit? If I'm just using a conveyancer then they don't necessarily have a trust account and I don't have a trust account specifically to hold deposits so do I just stick it in my bank account? What have other who have sold privately done?

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Reply: 1.1.1
From: Joanna K



Hi Owen,

Have the contract say that the deposit is to be invested and then open a interest bearing deposit and put the money in that.

Kind regards

JOANNA
 
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Sim

Administrator
Reply: 1.1.2
From: Sim' Hampel


Owen,

I don't know how your conveyancers do it, but mine all use trust accounts.

Immediately prior to settlement, I am required to deposit any extra required funds to complete the purchase into my conveyancer's trust account. He then accesses these funds on settlement day to settle with the vendor.

If your conveyancers are not using a trust account to do this, I'd be rather worried and also curious as to how they do it.

 
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Reply: 2.1
From: Robert Forward


I too have released deposit funds to the vendor for settlement. I didn't however release the full deposit, I found out how much they really needed and provided only that amount to them.

As it was they didn't want to pay their next mortgage payment and I only had to release $1500 of my 10% deposit.

If however they are wanting monies to be used for another deposit on a home, this is of the top of my head, you can have another contract drawn up where the monies sit in the other vendors solicitors trust account as a deposit. And the contract states that if your purchase falls through then the monies sitting in the third party solicitors trust account is automatically returned to you.

There may be holes in the above theory, but it's a way of thinking outside of the square.

But, now you need to benefit from being so nice. Ask them to give you something in return, get them to repaint the interior for you (in your colours of cause) or allow access for doing some reno cleanup works.

Only do it if you gain something you want from the deal. otherwise don't do it.

Well they are only my thoughts anyway.

Cheers,
Robert

Australian Speakers For Australian Conditions
http://www.Freestyler.net.au/events
 
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Reply: 1.1.2.1
From: Owen .


Sim',

You are looking at it the wrong way for my example. I'm selling, not buying so I am receiving the deposit. Joanna's advice seems the best. A simple ING account or something like it that won't be touched by either buyer or seller until settlement. Easy.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Sim

Administrator
Reply: 1.1.2.1.1
From: Sim' Hampel


Was just an observation about Conveyancers and not really relevant to your actual question.

 
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Reply: 2.1.1
From: Joanna K


Owen,

Just another thought...if you know a real estate agent, you can ask them to park the deposit in their trust account.

It shouldn't be too much of a hassell for them. All they'll need to do is show income in and income out for their accounting purposes.

Of course, the only downfall with that is that it won't attract interest.

Kind regards

JOANNA
 
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Reply: 2.1.1.1
From: Asy .


Owen,

Sorry to put a spanner in the works, but please check the legislation before you put the money anywhere.

For instance, in Victoria, the legislation states that any deposit moneys paid must be held in a trust account by a stakeholder (Licensed agent or solicitor who holds the money on the head of the contract, and not on behalf of any particular party), OR, must be held in a bank account in the names of ALL THE PARTIES TO THE CONTRACT.

This means that if you want to hold the money in an account, the account must be in the names of BOTH the purchaser and vendor.

There is no problem with an early release of the deposit, PROVIDED that the contract has become unconditional, and you are happy to accept settlement of the property when settlement is due.

The vendor may require the funds to put a deposit on their new property.

Also, for anyone interested, monies held in trust accounts do not accrue interest for the trust account owner. For instance, if an agent holds a deposit in a trust account the interest due on the money goes to the Estate Agents Guarantee Fund. This fund is used if something goes wrong with any agents trust accounts, and is sort of an insurance policy for the public.

Hope this helps,

asy



"Don't forget what happened to the guy who suddenly got everything he ever wanted...
He lived happily ever after.
(Willy Wonka).
 
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Reply: 2.1.1.1.1
From: Dale Gatherum-Goss


HI

I never pay more than abt $1,000 as a deposit anyway and so I don't care whether the vendor gets an early release. My argument is that by law, I do not have to pay 10% and the money is better off in my control earning me a few more dollars until settlement.

It does not always help, but, it is MY money!!

Just a thought

Dale
 
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Reply: 1.1.3
From: Kristine .


Owen

The Sale of Land Act in your State will have specific conditions regarding the acceptance of deposit funds.

DO NOT repeat DO NOT treat this money as general funds. Everything may go OK, but if it doesn't, why put yourself in a situation of possible fraud or conversion charges?

Yes, you AND THE PURCHASER can open a joint account into which the funds are put until settlement. All parties to sign for withdrawal.

Yes, you can approach any trust account operator ie Solicitor, Conveyancer, Real Estate Agent, Accountant, and request that they accept the funds into their trust account and act as stakeholder until release of deposit funds or settlement. The Purchaser's solicitor can also act as stakeholder. They may or may not decide to charge you a 'processing fee' for doing this.

However, S.27 of the S of L Act allows early release of Deposit funds to the Vendor once certain conditions have been met. This has been law and common practice for at least 10 or 15 years in Victoria. Nothing suspicious about it. Obviously, it is common that vendors have themselves purchased elsewhere and may require the deposit funds to facilitate that transaction. It also allows the Agency, who have completed their task, to be paid their commission, reimbursed for advertising expense etc, without waiting 90 days or longer.

Early release is agreed to by the purchaser, usually once the title search is proved and requisitions have been answered. When in any doubt, ask the solicitor, or conveyancer who is handling the legal work for you. If you are doing it yourself to save a few bob (and we're only talking a few hundred dollars, not exactly a king's ransom), remember the full weight and responsibility of the law rests with you. At the very least, ring the consumer affairs or office of fair trading in your state and get some expert advice.

By the way, Owen, who prepared the Contracts of Sale?

Cheers

Kristine
 
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Reply: 1.1.2.1.1.1
From: Owen .


When I asked my conveyancers about this they said that usually when you are buying your deposit goes into the sellers conveyancer/solicitors trust account if they have one or the real estate agent trust account.

When you are selling because my conveyancer doesn't have a trust account it usually goes into the real estate agent account. My question was what do you do if you don't have a real estate agent because you are selling privately.

My conveyancer hasn't dealt with many private sale and he's been in business for about 20 years. That's an interesting comment on it's own.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Reply: 2.1.1.1.1.1
From: Owen .


Thanks for all your info people. I have a few agent friends and in future I will see if I can park the deposit in their trust accounts if necessary. I agree with you Dale, when I am buying my deposits are always low so I keep control of my money and if it get released then so be it. In this example though I was the seller so was receiving the deposit money.

And after all the questions and great answered the deal never came through on my sale and I am renting it instead. I didn't think I could get a tenant in this market but have been proved wrong again as I got 2 applications last night. No need to sell it now. Thanks for all your help and I'll file away the info for next time.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Reply: 1.1.2.1.1.1.1
From: Robert Forward


It's an interesting question to ask why a conveyancer who has been in the business for 20 years doesn't have a trust account set up.

I would think that he would have used a trust account for people that use him/her for buying to place monies into for settlement to take place.

Personally, I think this is weird, so much so I wouldn't use them. But I'm a touch on the cautious side, especially when were talking my money.

Cheers,
Robert

Australian Speakers For Australian Conditions
http://www.Freestyler.net.au/events
 
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Reply: 1.1.2.1.1.1.1.1
From: Owen .


They used to have an account for years but closed it down as there was no need for it and the costs were outweighing the benefits or use. The real estate agents were taking on this role instead. They currently have an account for a specific client who is doing a large development and needs somewhere to keep OTP deposits. They said if I really got stuck I could use this account but it wasn't really for other clients.

Don't worry about these guys. Very reputable and have helped me enormously on some recent purchases. A lot better than solicitors I have used in the past.

Owen

"Gambling promises the poor what property performs for the rich – something for nothing"
 
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Selling Privately... who holds the deposit?

Reply: 1.1.2.1.1.1.2
From: Ross Sondergeld


Hi Owen,



Selling/Buying Privately... who holds the deposit?



Owen said, "When I asked my conveyancers about this they said that usually
when you are buying your deposit goes into the sellers
conveyancer/solicitors trust account if they have one or the real estate
agent trust account."


(In QLD) When i buy for people and we do an "off market" deal... i always
let the buyer's solicitor hold the deposit money.

(* Note - I'm a licensed r/e agent & i don't operate a trust account.)


Simple. Most of the time... the buyer and seller don't really care.
Personally i always prefer to let my representative (i.e. solicitor) be the
stakeholder/deposit holder.





Ross Sondergeld ~ Buyer Agent

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
" Imagine buying real estate the easy way...
...with a Buyer Agent on your side!!! "

Creative Real Estate Solutions Mobile 0412 289 464
Office 9b, 34 Glenferrie Drive Office (07) 5562 1555
East Quay Corporate Park Fax (07) 5562 1248
Robina QLD 4226, Gold Coast Buyerside@hotmail.com
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~


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Reply: 1.1.2.1.1.2
From: Dianne Ferrara


I have a question re deposit bonds. My OTP is due to settle in Feb 03,
however my deposit bond will expire in Dec 02. When I signed the contract I
was told the property would settle Nov 01 and settlement has been delayed
several times.

Is it feasible for me to ask the developer to meet the cost of another dep.
bond as the delay has been on their behalf! Do I have any legal right to do
this?

I would appreciate some opinions..

Thanks Di
 
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