A house deposit is a significant sum of money. Find out who should take responsibility for collecting and holding onto it in the leadup to settlement.
However, as many of us have experienced when purchasing items from members of the public, it can feel risky to forward a large amount of money to someone you don’t know. This is why there are safeguards in place to protect your deposit in the event of the transaction falling through.
Take a look at how the safe handling of home deposits works:
Who is responsible for collecting a real estate sale deposit?
Congratulations on making an offer on a home and having it accepted.
It’s more than likely you will have interacted with a real estate agent to make this happen. In almost all circumstances, the deposit for this new property is payable to this real estate agent. But before you hand the money over, either as a cheque or direct deposit, make sure the agent is named on the front page of the contract.
If you’re buying from a homeowner who has not employed a real estate agent to sell their property, your deposit should go to this person’s conveyancer/solicitor trust account. This will protect your money from an untrustworthy vendor.
There may be a rare situation where the seller/vendor’s conveyancer or solicitor does not operate a trust account. If this is the case, it is recommended that the deposit be held in the trust account of your own conveyancer or a solicitor. Again, bringing in a third party means the money is less likely to end up in the wrong place.
In a very rare situation, if neither vendor’s nor the purchaser’s solicitor or conveyancer operates a trust account, then most likely the parties would agree that the deposit would be paid by a deposit bond so there is no cash paid directly into an individual’s bank account.
Who to make a home deposit cheque out to
In terms of who is the deposit payable to, if you are paying by cheque, you can use either a bank cheque or a personal cheque.
It’s best to check with the real estate agent who to make the cheque payable to. This is because sometimes the trading name they operate under can be different from the registered business name. Having an invalid name on the cheque can render it void and you’ll have to head back to the bank.
The most common way to pay the deposit these days is by an electronic funds transfer. In this case, ask the real estate agent to provide you with their trust account details so you can make the deposit. You may need to allow a minimum of 24 hours for the funds to be cleared in the agent’s account or also check your daily limit on the amount of funds you can transfer in one day.
What to do before you pay a deposit
It is exciting to commit to buying a home but make sure you do your due diligence.
Before you pay the deposit, request a copy of the contract for sale of the property. You should forward the contract to your conveyancer for their review. The sellers should be ok with allowing you a few days to check the contract is fair.
When is your deposit released?
The real estate agency which holds your deposit will only release it to the seller on the day of settlement, after they have received confirmation from both the vendor’s and your conveyancer that settlement has taken place. You will then be able to collect the keys for the property from the real estate agent’s office.
In the meantime, between exchange and settlement, you’ll be busy finalising your loan with the bank and working with your solicitor/conveyancer to ensure all other contracts and legal details are taken care of.
Need the support of a solicitor to buy or sell your home? Contact Thorpe Conveyancing today.
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