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. Keen to know more? Learn how to get prepared for settlement.
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. Get around the ins-and-outs of offset accounts to see if it’s available as part of your current home 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 matters, 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. NAB Home Insurance and NAB Home Insurance Essentials can help keep your home covered.
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 fixes aren't made, you'll void the contract and give the buyer a way to back out of the sale.
Looking to buy? Keep this in mind
Home loan pre-approval
Even with a fresh sale under your belt, you might need a new home loan to land in your new place – especially if you're upgrading/planning to splurge a little (no regrets!).
If you're familiar with the pre-approval process already, you already know how helpful it can be – and it might be worth refreshing as your financial position might have changed since the sale.
Most of all, it shows your vendor that you're the real deal. Get the lowdown on how pre-approval works to be fully prepared.