But having an offer accepted by the seller can also be an emotionally turbulent time.
So you may want to consider giving the agent a holding deposit, otherwise known as a ‘good faith’ bond to ‘hold’ the property while you get yourself sorted.
What is a ‘holding deposit’?
A holding deposit simply demonstrates to the agent, more so than the seller, that you are serious about the offer made and will proceed to signing contracts, provided that you are happy with the contract terms.
A holding deposit is NOT the same as the ‘deposit’ required to be paid on contractual exchange.
Firstly, the holding deposit is paid to the agent, not the seller. Secondly, the contractual deposit – usually 10 per cent of the purchase price – does not need to be paid until contracts are formally exchanged.
In fact, up until the point of formal contract exchange, nothing is legally required to be paid by the buyer.
What rights does a holding deposit give the buyer?
There’s a general misconception that a holding deposit gives the buyer an exclusive right to buy the property. But this is not the case.
Even with a holding deposit, a seller can still continue to offer the property to other people or accept a higher offer from another person.
The fact of the matter is, a buyer really has no rights in relation to the purchase until contracts are formally signed and exchanged. All the holding deposit really does is give the agent an assurance that you’re serious about buying.
How much should a buyer pay?
For the reasons above, it’s important not to over-commit yourself if you decide to pay a holding deposit. About $200 is generally enough to show the agent you’re serious about your offer to buy the property.
You are also entitled to decide not to pay a holding deposit – and legally that would convey no more or less rights than if you did pay one.
It is also important to know what will happen to your holding deposit if you pay one and the sale goes ahead.
The same applies if you or the seller back out of the deal. The holding deposit may be returned to you, it may be forfeited, or it may be added to the deposit amount payable under the contract if the sale proceeds. It all depends on what has been agreed between you and the agent.
By asking your agent beforehand, you will know exactly where you stand.