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Daffy2016

How much deposit to offer?

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Dianalynch

Melbourne, we’ve always paid 10%, but there’s always been a fair bit of competition for the properties we’ve bought. We’ve sold 2 properties at auction and 1 private sale, auction conditions are 10% and the private sale was also 10%. It’s pretty standard here. 
 

I would say just offer the $5m as the deposit and see what happens. It’s a pretty good market for buyers there? 

 

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Just Another Cat

We paid 5% deposit in VIC less than two years ago. In VIC 10% is what is usually asked.

We refinanced our first home to get the cash for the deposit. We could have also applied to have the deposit on our first home (it was under contract) released from trust to use as a deposit on the second home. My conveyancer said that was fairly common. 

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hills mum bec
14 hours ago, SeaPrincess said:

What difference does it make? The vendor doesn’t get the deposit - it goes into a trust fund making money for the agent. We had already sold our own house and could have come up 10% when we bought our house, but that’s not the normal process in WA. The agent suggested $10K as showing we were serious. He knew we’d been looking for months because we’d looked at multiple listings with him, all in a similar price range.

There is definitely no interest earned on Real Estate trust accounts in SA and they are audited once a year as part of the licensing requirements.  The amount of the deposit does matter because it needs to be an amount that the purchaser will not want to walk away from.  The deposit is the guarantee that the purchaser will go through with the sale.  Eg.  if you paid a deposit on a property then found a property that you like better that was cheaper before the original property had settled, you are going to be far more likely to surrender a $1,000 deposit for defaulting in a sale than you would if you paid a $10,000 deposit.

I work in real estate in SA.  10% deposit is rare and only usually paid under auction sales.  5% deposit is a lot more common and at our agency anything less than $20,000 is quite rare.  Hope that helps.

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hills mum bec
13 minutes ago, Just Another Cat said:

We paid 5% deposit in VIC less than two years ago. In VIC 10% is what is usually asked.

We refinanced our first home to get the cash for the deposit. We could have also applied to have the deposit on our first home (it was under contract) released from trust to use as a deposit on the second home. My conveyancer said that was fairly common. 

Deposits can not be released early in SA.

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can'tstayaway
1 hour ago, hills mum bec said:

The amount of the deposit does matter because it needs to be an amount that the purchaser will not want to walk away from.  The deposit is the guarantee that the purchaser will go through with the sale.  Eg.  if you paid a deposit on a property then found a property that you like better that was cheaper before the original property had settled, you are going to be far more likely to surrender a $1,000 deposit for defaulting in a sale than you would if you paid a $10,000 deposit.

Once the contract is unconditional, if a buyer does walk away, the vendor has rights to ‘enforce’ the contract.  It’s not just the deposit that the vendor gets to keep.

I know in my sales, my lawyer does property searches for other assets the buyer has in their name (rather than trust) so if they default on the contract, I would have rights to put caveats in their property/ies. 

It’s messier, requires funds for the lawyer and takes time.  I’ve never had to enforce a contract like that because both parties generally want to come to a mutual agreement.   I have had one contract where I let the buyer off the hook (and kept the deposit) and then sold the property a few months later for a lot more money.
 

 

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YodaTheWrinkledOne

we paid $25K last time, which wasn't anywhere near 10%.

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timtam92

Can you get a loan without a 10% deposit? Can you afford to buy a house if you only have $5k? How will you cover stamp duty, legal costs etc? 

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-Emissary-

We paid 5% last time but only because I had another mortgage and I rather the money sit in my offset. I think I paid 10% the first time.

On a different note, I am very surprised there are banks out there who are still lending out  at 100% (or close to) loans at the moment even with parental guarantees. I assumed you have spoken to the bank and made sure you are able to get approval for your loan...

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~*~blizzy~*~

We paid 5% last 2 times we purchased. In NSW. 
 

Many of the contracts in NSW even if they accept less than 10% they have a clause to state if you don’t proceed with the sale the vendor is entitled to the 10% and you agree to pay that. 

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SeaPrincess
1 hour ago, timtam92 said:

Can you get a loan without a 10% deposit? Can you afford to buy a house if you only have $5k? How will you cover stamp duty, legal costs etc? 

Only having access to $5,000 at the time of making an offer doesn’t mean there’s only $5,000 available. We had close to 30% once the sale of our house settled, but we paid only $10,000 deposit when the contracts were signed.

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Daffy2016

We have $10,000 available (that’s not all our savings, just what we have set aside) and parental guarantee. Trust me, we feel embarrassed enough that at our age, this is all we have.

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~Jolly_F~
9 minutes ago, Daffy2016 said:

We have $10,000 available (that’s not all our savings, just what we have set aside) and parental guarantee. Trust me, we feel embarrassed enough that at our age, this is all we have.

Don’t be embarrassed. You are not the only ones is this position, it’s a common occurrence and you certainly won’t be the last. 

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TigerQueenofSheeba
14 minutes ago, Daffy2016 said:

We have $10,000 available (that’s not all our savings, just what we have set aside) and parental guarantee. Trust me, we feel embarrassed enough that at our age, this is all we have.

Don't be embarrassed. Look at the world we live in. The cost of living goes up, but wages do not necessarily increase along the same lines. There is nothing to be embarrassed about! I'm jealous you can buy when I'm several/many years off 🙂

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hills mum bec
10 hours ago, can'tstayaway said:

Once the contract is unconditional, if a buyer does walk away, the vendor has rights to ‘enforce’ the contract.  It’s not just the deposit that the vendor gets to keep.

I know in my sales, my lawyer does property searches for other assets the buyer has in their name (rather than trust) so if they default on the contract, I would have rights to put caveats in their property/ies. 

It’s messier, requires funds for the lawyer and takes time.  I’ve never had to enforce a contract like that because both parties generally want to come to a mutual agreement.   I have had one contract where I let the buyer off the hook (and kept the deposit) and then sold the property a few months later for a lot more money.
 

 

I think this is something that varies by state.  In SA you can’t enforce the contract.  If the purchaser can not settle on settlement date the vendor can issue a notice to complete with a specified date to settle by (I think it’s 10 days notice) then if it doesn’t settle on this date the vendor can choose to issue another notice to complete or can terminate the contract and retain the deposit.  If the contract is terminated then the vendor can sue the purchaser for damages if the costs for reselling are more than the deposit retained.  Costs would include readvertising costs, extra interest costs plus any shortfall between original contract price and the price sold to second purchaser if the property is sold and settled at lower price than original contract.  It makes it a whole lot easier for the vendor if the deposit paid by the purchaser is large enough to cover the costs of a possible default so that the vendor does not have to go down the path of going to court to recoup their costs.

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