Survived auction day?
Get on top of your must-do’s whether your property sold or passed in.
What happens with the buyer’s deposit?
How it's paid
As
the seller, how the deposit gets paid is your call – be it by cheque, bank transfer
or another method. Some buyers might float paying part of the deposit on the
day and the rest at a later date. Being flexible helps, but contracts of sale
usually require the entire deposit be paid on the day. It's all about balancing
your needs with the buyer's.
How much it is
The
deposit is usually 10% of the total sale price. But if you're after something a
little bigger, make sure your agent clearly states this in the auction
preamble. Just be wary that a bigger deposit could put off a lot of potential
buyers.
Where it goes
The
paid deposit goes into a special trust account held by your agent, lawyer or
conveyancer. Once settlement date arrives and the buyer pays for the property
in full, the whole amount – deposit included – will first go the bank (to pay
off any loans held against the recently sold property). Then, it’ll move into
your pocket.
Where to
park it – offset account
You could
consider parking the deposit in an offset account. It's a transaction account
linked to your home loan that trims the interest charge on your home loan by
using the balance of the transaction account. This allows you to pay less
interest over the life of your loan
Accessing
the deposit before settlement
By default,
the deposit isn't technically yours before settlement and can’t be released any
earlier than 28 days after the contract’s been signed – but you may be able to
get it earlier via a Section 27 early release.
On top of
the contract becoming unconditional, a Section 27 needs to be agreed to by the
buyer. In considering your application, they’ll weigh up things like your
current mortgage and any other loans attached to the property.
Buyers
often agree to a Section 27 out of goodwill, but it’s not a done deal, so try
not to make plans that may rely on it.
Review
your home insurance coverage
Why you
might need insurance
As with a
lot of after-auction tasks, taking out home insurance all comes down to your
contract. You'll be asked to hand over the property in the same condition as
when it was sold.
Insurance isn’t
required by either party but we highly recommend you consider taking it out, or
maintaining it, to cover any damage between signing and settlement.
What could
happen if you don’t have insurance
Consider a
scenario where enough damage occurs before settlement to change the property's
condition. Without insurance, the entire cost of getting the house back to its
promised condition comes out of your pocket. And if repairs aren't made, you'll
void the contract and give the buyer a way to back out of the sale.
If
you need to talk to a lending specialist about an offset account, contact us @ propertyloans@realrenta.com and we will arrange for a lending
specialist to contact you shortly.
Jason Gwerder
Saturday, 23 November 2019
