Any downside of a 5% deposit for auction

I read it somewhere on PC about putting down a 5% deposit instead of 10% after winning the auction.

I think it has obvious benefits such as 5% gets to stay in my offset longer rather than goes to the agent’s trust account.

Also if it appears that we are struggling with funds, the agent probably won’t negotiate too hard with us if the property was passed in.

Another benefit I can think of is that if we asked the agent whether we can do 5% deposit and the agent rejected, it suggests that there are a lot of interested parties so the agent doesn’t care if we bid or not.


Any thoughts on this? What’s the downside of asking the agent for a 5% deposit for auction?

 

No, its becoming quite common .

 

No downside if it makes it easier for the agent ie more punters they will do it

 

Yes we see this a lot.

Don't ask the agent. Get your solicitor to ask the vendor's solicitors.

 

Why even 5%? I offered a $10,000 deposit and it was accepted.

Why?

 

You want a formal acceptance to an amendment to a contract term.

 

Thanks everyone for your help! Guest how much was the property for which the 10k deposit was accepted?

 

From memory I had something in writing prior to bidding, deposit terms can be written on the contract when signing.

$300k+. A $10k deposit may not be enough for Melbourne/Sydney prices, but point is even less than 5% may be fine. Depends on interest at auction, agent and vendor... can only ask

 

Wait how does this work? If you win at auction and go in to negotiate 5% but the vendor doesn’t accept and you don’t have 10%?


Or do you negotiate with agent before auction and say you will only bid if 5% deposit is accepted?

 

You have to negotiate the 5% deposit or any other changes you want to the contract BEFORE the auction, otherwise you are accepting the contract T&Cs as they stand.

 

Yes as above, all before the auction. When reading out the conditions at the start of the auction the auctioneer will say something along the lines of "10% deposit will be required, unless other arrangements have been negotiated with the vendor/agreed prior".

 

As a bidder 5% sounds attractive

 

I always ask for a 5% deposit including for auctions. This way I keep more of my cash in my accounts for longer.

For properties that are going to auction and that I am keen to purchase, this is all negotiated via my solicitor so all terms and conditions are noted. The vendor then knows that we're serious.

I also like to ask for extended settlement (90+ days) with early access to the property(s).

 

You can request anything you want to prior to auction, it is up to them to approve it or not. Things like settlement and deposits are quite easy, something like STB&P will pretty much be declined.

For the deposit the REA will rarely have the deposit less than their cost (including marketing). If their cost is 15k it will be unlikely you will get it for 10 - 15k but 20k and they will be more okay with. Typically 5% is easy to get however the closer you get to 1% the harder it is to be approved.

If the property passes in you can negotiate it all again.