Deposit anomaly

Discussion in 'The Buying & Selling Process' started by Mike Gerard, 22nd Jul, 2018.

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  1. Mike Gerard

    Mike Gerard Member

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    Hi Folks,
    Just curious to know why it's necessary to put down 20% deposit. Is it just NSW.?
    I bought my first house in 1983 with $1000 down.. this year I bought a property in Qld with $1000 down.
    So when did it become so expensive, at least here in NSW?
    If you exchange contracts with $1000, you're locked in. Obviously some may suggest, backing out with no real reason, costs less but perhaps a penalty of say 5% would avoid exploiting this?
    I think if deposits were minimal, the market would open up & move more fluidly. Just my opinion.
    Cheers
    Mike
     
    Mike Gerard, 22nd Jul, 2018
    #1
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Deposit is 10% not 20%
     
    Scott No Mates, 22nd Jul, 2018
    #2
  3. geoffw

    geoffw Moderator Staff Member

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    10% is the default but it can be negotiated lower.

    We sold a place in NSW 2 months ago, the purchaser wanted to provide 3% deposit. My solicitor advised not to accept less than 5%, as if something fell through, the agent was still entitled to commision, and there were still legal fees (although the agent said this has only happened once in his 20 years). The purchaser borrowed addition funds from parents to cover the difference.
     
    geoffw, 22nd Jul, 2018
    #3
  4. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

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    Perhaps you are thinking 20% deposits to avoid LMI?

    If you cannot complete a contract you might be sued for 10% regardless of the amount of deposit and you might even be up for any short fall if the vendor resells the property for less (including extra sale costs)
     
    Terry_w, 22nd Jul, 2018
    #4
  5. Mike Gerard

    Mike Gerard Member

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    Ok understood...thanks everyone for your input.
     
    Mike Gerard, 22nd Jul, 2018
    #5
  6. Mike Gerard

    Mike Gerard Member

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    Thanks folks.. understood.
     
    Mike Gerard, 22nd Jul, 2018
    #6