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How much deposit should I ask for?

It is up to you how much deposit you want to ask for but generally it will not be higher than 10% of the purchase price. However, you should still ask for a deposit from the buyer to be paid upfront as security over the sale. If the buyer signed the contract, paid the deposit, but is otherwise unable or unwilling to complete afterwards, you will be able to claim the deposit paid.

You should discuss with your real estate agent on what is the appropriate amount to ask for on a case by case basis. Remember that whilst the deposit is a consideration, it is not the only consideration on whether your proposed buyer is genuine about their offer to you.

What is a bank guarantee?

If your buyer does not have the cashflow for the purpose of making a cash deposit payment upfront, they may offer to give you a bank guarantee as security for the full deposit amount. A bank guarantee is basically a document provided by the buyer’s bank to confirm that they have the requisite amount of money in one of the accounts held in the buyer’s name and can provide the funds to the seller if it is claimed by the seller under the bank guarantee. Once given to you, the buyer will not be able to access the funds secured under the bank guarantee. However, you should get your conveyancing lawyer to check the conditions of the bank guarantee before accepting. If the standard contract used does not provide for the deposit by bank guarantee, you’ll need your conveyancing lawyer to specifically write one into the contract as a special condition to govern the use of it.

What is a deposit bond?

A deposit bond is a document provided by a bond issuer, which the buyer can use in place of a cash deposit. It is a form of security over the contract of sale and acts as a guarantee. If the buyer is unable to complete settlement and the seller enforces their rights, they can present the original deposit bond to the bond issuer to claim for the amount secured by the bond. The amount that can be secured is usually an amount up to 10% of the purchase price.

If you have been presented with a deposit bond by a buyer as security for the contract, you should ask your conveyancing lawyer to review carefully the term of the deposit bond to ensure that it is sufficient to protect your interest. In particular, note that deposit bonds often come with an expiration date. You should note this date down to ensure that you ask for a replacement before it expires.

A deposit bond can also be known as a deposit guarantee, so if you come across that term, review the document properly to confirm that it has the same effect as a deposit bond.

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