In NSW, the deposit on a contract for sale is 10% of the price unless a lower amount is agreed.
A 5% deposit is the example of a lower amount the NSW Government gives, but the seller must agree to it before exchange.
The agreement must be written into the contract.
Two different deposits
The word deposit is used for two different things when you buy.
The first is the amount you save towards the price, so that your lender will lend you the rest. This is your loan deposit.
The second is the amount paid under the contract when contracts are exchanged. This is the contract deposit.
This article is about the contract deposit.
The two are linked. If most of your savings are needed for the loan deposit and costs, you may not have a full 10% in cash to pay on exchange.
The usual rule
The NSW Government states that the deposit is 10% of the price unless a lesser sum, for example 5%, is agreed.
The seller does not have to agree to a lower amount.
So a lower deposit is a matter to negotiate with the seller, through the agent and the seller's solicitor, before you sign.
How a lower deposit is agreed
- Tell the agent, when you make your offer, the deposit you propose.
- Your solicitor asks the seller's solicitor to change the contract to show that amount.
- The change is written into the contract before exchange.
- You pay the agreed amount on exchange, by the method the contract allows.
An agent cannot change the contract. Only a solicitor or licensed conveyancer can.
Paying the deposit in two parts
For a private sale, a common approach is for the buyer to pay 0.25% of the price on exchange, with the balance of the deposit paid before the cooling-off period ends.
This matches the amount the buyer forfeits if the buyer withdraws during the cooling-off period.
If the buyer does not withdraw, the balance must be paid by the date the contract sets. The two-part payment must be written into the contract.
At auction
At auction, the successful bidder pays the deposit on the spot.
The deposit is usually 10% of the price, unless a lower amount, or a deposit bond, was agreed before the auction.
If you want to pay less than 10% at auction, raise it with the agent and the seller's solicitor before auction day. Do not leave it to the day.
Deposit bonds
A deposit can sometimes be given by a deposit bond instead of cash, if the seller agrees.
The NSW Government refers to paying the deposit by bank cheque or deposit bond.
Whether a bond is accepted is a term of the contract. Check it before you sign.
Where buyers get caught
Assuming 5% is automatic.
It is not. The seller must agree, and the contract must say so.
Missing the date for the balance.
Where the deposit is paid in two parts, the date for the balance is set by the contract. Diary it and pay on time.
Raising it on auction day.
At auction you pay the deposit on the spot. A lower amount must be agreed before the auction.
Confusing the loan deposit with the contract deposit.
Your lender's rules on your savings are separate from what the contract requires on exchange.
Common questions
Does a lower deposit change the price?
No. The deposit is part of the price. The balance is paid at settlement.
Who decides whether a 5% deposit is accepted?
The seller. Your solicitor puts the request to the seller's solicitor and records any agreement in the contract.
If I withdraw in the cooling-off period, what do I lose?
0.25% of the price. It is taken from your deposit. If the deposit is not enough, you must pay the difference.
If you want to pay a lower deposit, have it written into the contract before you sign. Call (02) 8062 6300.
This article is general information only. It is not legal advice for your situation.