When negotiating a contract for an IP, how much holding deposit would you offer.
Some sources say 10% – this seems incredibly high?
I have a friend who recently lost their deposit (which was quite large!) due to no fault of their own. This makes me very nervous providing anything more than $2000.
So, lets say for a $300,000 IP, how much deposit would you offer?
you can have 1 dollar till 10% of purchase price.
I normally give them A$1000 as a good faith.
If you don't proceed with the transaction, then 0.25% of the purchase price will be confiscatedProvide them with a $1000 deposit and if required or he does not agree put in a condition of 25% escalation for the next 3 years.
Hi JimmyJ
I have bought an investment property with a holding deposit of $20. At the time I wanted to borrow 110% of the purchase price for tax reasons.
DIYPM
Jimmy
When negotiating a contract for an IP, how much holding deposit would you offer.
A holding deposit is just that, it puts a place on hold. Please be aware that it is not legally binding to the vendor, agent or purchaser. It is a show of good faith. It is not the official deposit offered in the contract. Which in Victoria cant be anymore than 10%. That does not mean it cant be $2.00. I like 5% just in-case you enter the contract and need to pull out, and its accepted by most agents as OK. You don't have to give them the deposit immediately, you can put in the contract deposit to be paid by say 14 days.
How much to offer was you question. This is my opinion. Use it as a bargaining tool. If you are sure you want the place make your offer with confidence with a low price, then hit them with a firm 20% deposit today and have the cheque book with you. If they say no and want more only offer a bit more but then OK its 5 % deposit in 14days. This works best with unconditional offers. The more tools you have in your pocket to bargain with the better. Most vendors are not concerned with the deposit its the price they want. But if they see you are for real it helps.
Cheers
T………Except for buying off the plan from developers I have never paid more than a $5000 deposit. $1000 is the norm for me.
Just be wary about what you stand to lose if you don't proceed with the purchase. In most states, the contract (or the underlying legislation) will state that if you default and don't proceed with the purchase then the vendor is entitled to 10% of the purchase price. You will need to get your conveyancer/solicitor to tell you exactly how much you stand to lose if you don't proceed.
The benefit of only paying a small deposit is that if you do default, the vendor will have to sue you to get the remainder of the 10% which may or may not be worthwhile.
But don't believe that if you only pay a small deposit that is all you will forfeit if you don't proceed. Get advice on it.
Cheers
K
I put down about $100, it is what ever you can get away with paying to hold the property but you usually have to find the 10% deposit before settlement occurs at a later stage of the proceedings. Your solicitor will nudge you to pay the required deposit in the later stages of settlement.
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