Property deposit requirements
- Thread starter mgs4
- Start date
Did you negotiate that with the vendor, solicitor or agent? Did you find many incidences where you had push back against paying less than 10%. I would have thought this tactic would be strong in weaker markets where the vendor didn't have as much negotiating leverage.
Sometimes the vendor wanted more,if they want the deal,they will take whats on offer.
say you pay 1k on a 200k property
wont the bank still require 10% - 20%
Yes. This is just the deposit to the agents trust account to secure the deal. Incase buyer pulls out or cant settle then vendor has some compensation of sorts.
Cheers
There would be many factors involved, one of which is great timing.
They started buying just before the FHOG was introduced. Buying $50k property in which they immediately onsold via an installment contract and received the $7k FHOG as deposit.
There was also huge capital growth as a result. Those same properties would be worth $300k now probably.
If my client is buying I always recommend as small of a deposit as possible, if selling then a decent sized one.
One benefit for the buyer is that, in QLD if you terminate under the cooling off period then the termination penalty is up to 0.25% of the deposit, so even on a million dollar property if deposit is $100 that is it.
One benefit for the buyer is that, in QLD if you terminate under the cooling off period then the termination penalty is up to 0.25% of the deposit, so even on a million dollar property if deposit is $100 that is it.
I've had more push back from REAs than vendors.
They want the deposit to cover their commissions rather than chase the vendor during settlement.
And go to extreme lengths with getting the vendor to add a clause to the contract to ensure payment at settlement.
I have seen this used to help the buyer....
REA: "But the $1000 deposit is too small"
Buyer: "Why?"
REA: "Vendor will think you aren't committed to the sale"
Buyer: "I've just presented a contract of sale.. I'm in and happy with the deposit"
REA :"But.."
Buyer : "but what?
REA: "If the deposit doesn't cover the commission, the principal will go mental"
Buyer "Ok. I'll up the deposit to XX to cover the commission on finance approval...."
Buyer: "What price will get me a completed contract today...."
Cheers
They want the deposit to cover their commissions rather than chase the vendor during settlement.
And go to extreme lengths with getting the vendor to add a clause to the contract to ensure payment at settlement.
I have seen this used to help the buyer....
REA: "But the $1000 deposit is too small"
Buyer: "Why?"
REA: "Vendor will think you aren't committed to the sale"
Buyer: "I've just presented a contract of sale.. I'm in and happy with the deposit"
REA :"But.."
Buyer : "but what?
REA: "If the deposit doesn't cover the commission, the principal will go mental"
Buyer "Ok. I'll up the deposit to XX to cover the commission on finance approval...."
Buyer: "What price will get me a completed contract today...."
Cheers
offer them a peppercorn as a deposit, anything with value is sufficient consideration to give effect to the contract
I use 1k deposits.
90% of my clients use 1k deposits, exceptions only for auction conditions, public trustee provisions or the like.
90% of my clients use 1k deposits, exceptions only for auction conditions, public trustee provisions or the like.
There's less of this in WA since the commission is a settlement disbursement therefore vendor doesnt have to be chased up for it.
Buyer: If you get me the purchase I will make sure you are paid. Send through a copy of the commission invoice to my solicitors 3-4 days before settlement and I will make sure you are paid.
Then honour your word.
To keep the REA happy you could add a condition such as
1. The Seller acknowledges that deposit is less then the commission payable to the Agent. The Seller irrevocably authorises the Buyer's solicitor to pay the balance of the Agent's commission (inc GST) from the purchase monies upon completion of this contract.
Which basically means that the Buyer's solicitor prepares (or requests from the Buyer's bank) a cheque for the balance of the agent's commission and gives this to the Seller's solicitor at settlement.
1. The Seller acknowledges that deposit is less then the commission payable to the Agent. The Seller irrevocably authorises the Buyer's solicitor to pay the balance of the Agent's commission (inc GST) from the purchase monies upon completion of this contract.
Which basically means that the Buyer's solicitor prepares (or requests from the Buyer's bank) a cheque for the balance of the agent's commission and gives this to the Seller's solicitor at settlement.
