{"id":5195,"date":"2015-07-28T01:00:29","date_gmt":"2015-07-27T15:00:29","guid":{"rendered":"http:\/\/realestatetalk.com.au\/?p=5195"},"modified":"2015-07-28T01:00:29","modified_gmt":"2015-07-27T15:00:29","slug":"questions-about-deposits-on-contracts","status":"publish","type":"post","link":"https:\/\/channels.realty.com.au\/realtytalk\/questions-about-deposits-on-contracts\/","title":{"rendered":"Questions about deposits on contracts – Garth Brown"},"content":{"rendered":"

 
\nIn today’s show, conveyancer Garth Brown<\/strong>,\u00a0from Brown & Brown Conveyancers, answers our questions about deposits on contracts. Amongst them… what happens if there is no deposit, what are the circumstances that would see a buyer loose the deposit to the seller and how to avoid that?
\n <\/p>\n

Transcript:<\/h4>\n

Kevin<\/b>:\u00a0 We often think when we buy a property that the deposit is just part of the process, that\u2019s what you have to pay. Quite often, I get asked the question, \u201cHow much deposit should I pay?\u201d Let\u2019s have a look at that, and we\u2019ll also have a look at what really makes up a deposit and why it\u2019s important to have one with every contract.
\nI\u2019m talking now to Garth Brown from Brown & Brown Conveyancers. Garth, thanks again for your time.
\nGarth<\/b>:\u00a0 Thanks, Kevin. I appreciate it.
\nKevin<\/b>:\u00a0 How important is it to have a deposit with a contract? Can you actually form a contract without a deposit?
\nGarth<\/b>:\u00a0 No, you need to have the deposit. It\u2019s part of a valid and binding contract. It\u2019s known as consideration. There needs to be a deposit paid, a contract signed, and an intention to be legally bound. It\u2019s a major part of a valid contract. It must be there. If it\u2019s not there, you don\u2019t have a valid contract.
\nKevin<\/b>:\u00a0 How is the deposit used? Once it has been gathered by the agent, what happens?
\nGarth<\/b>:\u00a0 The agent places the deposit in a trust account. It\u2019s held there until settlement.
\nKevin<\/b>:\u00a0 Okay Garth, so that goes into a trust account, which means it\u2019s held in trust. It is owned by neither the seller nor the buyer at that stage. Is that correct?
\nGarth<\/b>:\u00a0 Yes, that\u2019s right. It\u2019s held by the agent as a stakeholder, and that is just ensuring the obligations of both purchaser and vendor. When they\u2019re completed, the deposit is released after the agent deducts their commission from the deposit.
\nSometimes what happens is that part of the deposit is needed before settlement. Both vendor and purchaser conveyancers agree to have part of the deposit released before settlement so that it can be used for the property to settle. Maybe the mortgage is a lot higher than what the contract allows for, so the deposit needs to be released to help out the settlement.
\nKevin<\/b>:\u00a0 That has to be by agreement between all the parties.
\nGarth<\/b>:\u00a0 That\u2019s right. It\u2019s very important that all parties, once a contract is exchanged, that the settlement proceeds do cover what is required at settlement to pay up the mortgagee. If not then all parties need to agree to have part of that deposit released to make sure that there is enough surplus to cover the mortgage to pay it out.
\nKevin<\/b>:\u00a0 You said earlier that it\u2019s there to allow the settlement to happen. In a scenario where it goes all the way through to settlement, the purchasers may have a pre-settlement inspection and find that there is something not quite right. At that point, is the settlement held up, or can it still go ahead?
\nGarth<\/b>:\u00a0 The object is to get the property across the line to settle. What can happen is that part of the deposit \u2013 it could be $1000 or whatever \u2013 could be held back. This would be resolved after settlement. They would just get the property to settle and then come back to sort out the smaller part of the transaction. The main objective is to get the property settled and then come back and sort out what is needed from there.
\nKevin<\/b>:\u00a0 Rather than let the sale fall over, it settles, the purchaser get its, they still get occupation, and then whatever problem needs to be sorted out with that $1000 or whatever the case may be, that\u2019s then done.
\nGarth<\/b>:\u00a0 That\u2019s right. We had one in country New South Wales, where the hot water system was faulty. It was working at the time of the inspection, but when it came to the pre-settlement inspection, the hot water system wasn\u2019t working. What happened there, the vendor agreed to hold back $1000 and to allow the property to settle. Then both vendor and purchaser negotiated together. They decided to replace the hot water system with that $1000 by the vendor, so it worked out really well.
\nKevin<\/b>:\u00a0 Right back at the start of our chat, you said that the deposit is paid to make it a binding contract. In the event that the sale doesn\u2019t proceed \u2013 because maybe the purchaser can\u2019t get their financing and has to terminate as normal \u2013 what happens to that deposit?
\nGarth<\/b>:\u00a0 Particularly in New South Wales, if you don\u2019t settle on that contract settlement date, you\u2019re issued with 14 days notice, known as a notice to complete. If you don\u2019t settle within that 14 days, the vendor can terminate the contract and keep your deposit, and then the vendor can go and sell the property to someone else.
\nKevin<\/b>:\u00a0 Under what circumstances can the purchaser get their deposit back?
\nGarth<\/b>:\u00a0 Particularly after you have exchanged contracts and paid the deposit, the purchaser\u2019s conveyancer would undertake checks to make sure that there are no road proposals to go through the property, or any railways, to acquire the land for education, or to put power lines through.
\nThese sort of things affect the value of the property, and if they haven\u2019t been disclosed in the contract, in the special conditions, before signing and you find out about these after you\u2019ve signed the contract, then you can rescind the contract to retrieve your deposit back based on some legislation there.
\nKevin<\/b>:\u00a0 There are parts of Australia where a contract can fail subject to finance, and I know in New South Wales, you\u2019ve explained that that is not the case, but in some parts of Australia, if it fails on the finance, for instance, the deposit is paid back to the purchaser.
\nGarth<\/b>:\u00a0 Yes, as long as that condition is in the contract there.
\nKevin<\/b>:\u00a0 A lot to get through. We will come back with Garth at some future time. I do want to talk to you about agency agreements, because that is another critical area that sellers in particular should be aware of.
\nGarth Brown from Brown & Brown Conveyancers. Thanks for your time, Garth.
\nGarth<\/b>:\u00a0 Thanks, Kevin.<\/p>\n","protected":false},"excerpt":{"rendered":"

  In today’s show, conveyancer Garth Brown,\u00a0from Brown & Brown Conveyancers, answers our questions about deposits on contracts. Amongst them… what happens if there is no deposit, what are the circumstances that would see a buyer loose the deposit to the seller and how to…<\/p>\n","protected":false},"author":176692471,"featured_media":5196,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_jetpack_feature_clip_id":0,"_jetpack_memberships_contains_paid_content":false,"footnotes":""},"categories":[10,13,25],"tags":[101],"class_list":["post-5195","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-kevin-turner-sponsored-channels","category-latest-story","category-sponsored-channels","tag-podcast"],"yoast_head":"\nQuestions about deposits on contracts - Garth Brown - Realty Talk<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/channels.realty.com.au\/realtytalk\/questions-about-deposits-on-contracts\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Questions about deposits on contracts - Garth Brown - Realty Talk\" \/>\n<meta property=\"og:description\" content=\"  In today’s show, conveyancer Garth Brown,\u00a0from Brown & Brown Conveyancers, answers our questions about deposits on contracts. 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