When making an offer on a property do I have to pay a deposit and when should I pay it?

Question

When making an offer on a property do I have to pay a deposit and when should I pay it?

Mcveah Fleming advise the following;

Answer

It depends on the situation.

For example if it is a private sale between parties (i.e. no agent involved) the parties may agree that no deposit should be payable or a very minimal deposit. However in most instances, especially if the property is being sold via an agent, a deposit will be requested. A deposit can be any amount that you wish to pay but most agents would instruct the vendor to ask for a 10% deposit (standard practice in New Zealand), however any purchaser has a right to negotiate a set figure or a lesser deposit for example 5% (again it depends on the situation and what the parties agree to).

Auction Agreements usually require a 10% deposit and this is set out in most auction agreements.

The deposit is usually payable as follows:

Auction, immediately upon being the successful purchaser and to the real estate agent.

Under standard sale and purchase agreement it most common to either request that the deposit is paid upon signing of the agreement (and most agents will push for this, however as purchaser it is prudent to suggest that you are only willing to pay it once the agreement is unconditional); or it would be payable upon the agreement becoming conditional.

If as purchaser you would prefer to make the deposit payment upon the agreement becoming unconditional you will have to instruct the agent to insert this on the front page of the agreement and as follows: “……..payable to the real estate agent’s trust account upon the agreement becoming unconditional”.