If you have your house on the market, you are selling at a time
where property prices and mortgages are high. Buyers will
need to offer a deposit to purchase, but the current market
conditions mean it is uncommon that a buyer will
have a 10% deposit. However, the Contract for Sale of Land
stipulates that a 10% deposit must be paid on exchange of
contracts. So this leads many people to question " Can I sell
my house to a buyer with a 5% deposit? " and if so, how
is this done? and is there any risk? The simple answer is yes you
can and yes it does come with a risk, but there are ways to
minimise the risk.
You can accept any deposit you wish under the Contract for Sale
as long as it is agreed to by all parties, but here is
If you agree to accept a 5% deposit and if you ever had to
terminate the Contract on your buyer, then you would have to try
and recover the balance of the 5% due to you under the Contract.
This would be done through litigation (going to court), which is an
expensive process with no guaranteed outcome.
If you do not feel comfortable agreeing to a 5% cash deposit,
you can always ask your buyer to obtain a 10% deposit bond. A
Deposit Bond acts as a substitute for the cash deposit between
signing a Contract and settlement of a property. At settlement the
purchaser would then pay the full purchase price including the
deposit. A Deposit Bond can be issued for all or part of the
deposit amount required, up to 10% of the purchase price.
Thus, it is safer to ask for a 5% cash deposit together with a
5% deposit bond, which would total your whole 10% deposit.
Ideally, it is up to you whether you agree to accept a 5%
deposit, just remember that it does come at a risk. Even though you
are lead to believe it is "common practice" you are
entitled to the 10% deposit under the Contract for Sale, you do not
need to accept the 5% even if there is a "special condition in
the Contract" as if you do accept the lesser deposit,
that is most likely all you will get if the Contract
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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Warranties can be risk-shifting mechanisms when the party giving the warranty is not the party at fault for the defect.
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