On the very first page of a Contract of Purchase and Sale, there is a section devoted to the deposit. It is a specified amount of money that will be deposited in the trust account of the buyer’s Realtor’s company, kept there until closing. The deposit forms part of the down-payment of the purchase price.
A common question is, “How much should I make as my deposit?” The deposit is a negotiable term and depends on the local common practice, the purchase price of the property, your cash available, and circumstances to do with the offer. In Victoria, it can be as little as $2000 for a very low priced property - $20,000+ for a high end property. The norm is $5000 - $10,000. In competing offers, an extra-large deposit may sway the sellers to accept that offer over other offers if all other terms of the contracts are equal in value.
The deposit will be cashed, so before you write an offer it’s important to know whether you have enough cash to make a deposit when the time comes. The practice in the Victoria area is to require the deposit to be made within 24 – 48 hours after the removal of all conditions. If your money is tied up with an investment fund, it may take a few days before your money is available. Therefore, you should contact the people involved at least a week before the deposit deadline in order to avoid the panic of suddenly discovering that your money is unavailable when needed.
The deposit is a term of the contract and if not fulfilled on the specified date, it is considered a serious breach of the contract. The buyer’s agent must notify the seller’s agent immediately of the breach. The sellers have the option of extending the date or terminating the contract. If a better offer has been presented before you remove conditions, it’s an easy out for the sellers to void your contract and accept the new one.
Another common question is, “Can I lose my deposit?” The short answer is, “Yes you can.” The circumstance under which you can lose your deposit is when you decide, after the removal of all conditions, that you will not proceed with closing on the deal or a situation arises in which you are unable to do so. If you don’t willingly give up the deposit to the seller, the seller can take legal action which will in almost every case be granted to the seller.