Paying the deposit

The deposit is your financial commitment to purchasing the property.

It forms part of the purchase price and is held in trust until settlement. While it may feel like just another payment, the timing, structure and handling of the deposit are governed by your contract.

Getting this right protects both your money and your legal position.

In Australia, the standard deposit is often 10% of the purchase price, but this is negotiable.

For example:

• $800,000 purchase → $80,000 deposit
• $1,000,000 purchase → $100,000 deposit

In some cases, buyers negotiate:

• A reduced deposit (e.g. 5%)
• A split deposit (partial upfront, balance later)

The agreed amount will be clearly stated in the contract.

Timing depends on how you purchase.

• A small holding deposit may be paid when making an offer.
• The balance is usually due upon exchange of contracts.
• In some states, it may be due within a specified number of business days after exchange.

• The full deposit is typically payable immediately after the auction concludes.
• Contracts are generally unconditional.

Because auction deposits are due on the day, funds must be accessible in advance.

Always confirm the exact deadline in your contract.

Deposits are usually held in a trust account, often managed by:

• The selling agent
• The seller’s conveyancer or solicitor

Trust accounts are regulated and audited.

The deposit is not released to the seller until settlement, unless the contract specifically allows early release under certain conditions.

If settlement does not proceed due to valid contract conditions (such as finance approval failing during a cooling-off period), the deposit is typically refunded.

If a buyer defaults without valid grounds, the seller may be entitled to retain it.

Common methods include:

• Electronic bank transfer
• Bank cheque
• Deposit bond (in some circumstances)

Always confirm account details directly with the agent or conveyancer using verified contact information.

Property transactions are a common target for cyber fraud.
Never rely solely on emailed bank details without verbal confirmation.

A deposit bond is a guarantee issued by an insurer that substitutes for a cash deposit upfront.

It allows you to:

• Avoid transferring a large cash sum immediately
• Preserve liquidity until settlement

At settlement, you pay the full purchase price including the deposit portion.

Deposit bonds are not accepted in all transactions and must be agreed to by the seller.

The consequences depend on the contract terms.

If you withdraw:

• During a valid cooling-off period (where applicable), you may forfeit a small percentage.
• If a finance or building condition fails within agreed timeframes, your deposit is usually refunded.
• If you default without contractual grounds, the seller may retain the full deposit.

Deposits are designed to discourage contract breaches.

Understanding your conditions before exchange is critical.

The deposit forms part of your overall contribution toward the purchase.

For example:

Purchase price: $900,000
Deposit (10%): $90,000
Loan required: $810,000 (plus costs)

If you are borrowing with a smaller deposit (e.g. 5%), lenders may require Lenders Mortgage Insurance (LMI).

The deposit is separate from stamp duty and other upfront costs, which must also be budgeted for.

• Missing the deposit deadline
• Transferring funds to unverified bank details
• Assuming the deposit is refundable in all circumstances
• Not understanding cooling-off conditions
• Forgetting to account for additional upfront costs

Clarity at this stage prevents financial risk.