1. Paying a Property Deposit in New South Wales (NSW)
In NSW, a deposit is typically 10% of the purchase price, although a lower deposit (usually 5%) can often be negotiated.
If you’re going to an auction, you should get prior agreement as to what percentage deposit the vendor will accept (e.g. 10% v 5%) and have funds ready to pay as soon as the auction is won.
A common misconception is that you can wait until after the weekend to pay the deposit – that is not the case unless explicitly agreed (and that would be unusual).
If you don’t pay the deposit immediately after the auction you are in breach of contract.
You can pay the deposit by way of bank cheque or with a special EFT application that most agents have nowadays (e.g. Macquarie DEFT Auction Pay). You should also be able to pay with a personal cheque - although agents are increasingly less comfortable accepting these so you should check beforehand.
If a bank cheque is used, you should arrange (n the days before the auction) a bank cheque payable to the trust account of the agent for the maximum amount you would be likely to have to pay if you win the auction.
If you end up buying the property for a lesser amount, the agent can refund you that surplus portion of the deposit after it clears in their account. Similarly, if you end up buying the property for over the maximum amount, most agents will let you “top-up” the deposit on Monday, assuming it’s not a huge shortfall.
If you buy a property via private treaty, the same payment options would be available however it is important to note that if you have been granted a cooling off period you are only liable for 0.25% of the deposit until you proceed unconditionally. Being that the case, most agents will allow you to just pay 0.25% until the cooling off period expires where the remaining 9.75% (or 4.75%) would be immediately payable – however make sure these arrangements are confirmed in writing.
2. Paying a Property Deposit in Victoria (VIC)
The principles and payment options for deposits are very similar in Victoria as to NSW.
One difference is that, if a cooling off period is applicable, the initial deposit is usually $100 or 0.2% of the purchase price (whichever is more) with the remainder being payable when the contract becomes unconditional (after 3 Business Days or, if a Finance condition or Pest & Building Condition apply a longer period, usually 14 days).
Like in NSW, Victoria contracts also contemplate the alternative option of a deposit bond being paid. A deposit bond is an insurance policy in favour of the vendor which becomes payable for an amount equal to the deposit if the purchaser defaults at settlement.
The purchaser arranges this and hands it (or, if digital bond, is being used, emails it) to the agent on exchange in lieu of a cash payment. The advantage of this is that purchasers don’t need to break other cash investments they might have to pay a deposit. It’s also probably safer than transferring cash around given the high incidence of cyber fraud (see further below).
It is important however to remember that while it is common for vendors to accept a deposit bond, it is ultimately their prerogative and needs to be agreed prior to exchange.
Vendors will almost always demand that the deposit bond is backed by a reputable, highly-rated insurer (like QBE). A good option therefore is to look at a deposit bond from Deposit Assure, the leading provider inAustralia.
3. Paying a Property Deposit in Queensland (QLD)
The QLD market is slightly different from NSW and Victoria in that (a) there are a lot less auctions which take place and (b) the private treaty transactions will more often than not allow a deposit of less than 10% being paid and often in instalments.
The standard contract contemplates an initial (mini) deposit,usually $1,000 - $5,000 and often permits the purchaser to pay this a day or two after signing contracts.
There is no automatic further deposit payable when the contract becomes conditional unless specifically inserted the contract - and often its not.
Therefore deposits are very often smaller in the QLD market and there is a lot more flexibility as to when they need to be paid. Deposit bonds are therefore less frequently used.
Deposits can be paid by bank cheque and personal cheques as in the other states, but because the deposits are smaller, the most common way payments are made are via a standard ETF payment to the agents trust account from a buyers online banking account.
These kinds of transfers are very, very susceptible to conveyancing scams whereby criminals impersonate agents and conveyancers to ask to for deposit instalments to be transferred to their bank accounts.
It is very important when transferring a deposit (or anyfunds) via ETF that you verbally confirm the details of the transaction with the payee (i.e. agent). This advice is applicable to all states and territories but particularly QLD given the higher usage of retail online banking systems to pay deposits.
Conclusion
If you’re unsure about how to pay your deposit or need advice on negotiating deposit terms, our team at Dott & Crossitt is here to help. Get in touch with our experienced conveyancers today!
