When selling a property, usually a sum of 10% of the purchase price is paid as a deposit by the Purchaser. Recently, however, the acceptance of 5% deposits are becoming more acceptable, especially as property prices have increased.
Is there a risk to you as a Vendor if a 5% deposit is excepted?
The main risk associated with accepting a deposit of less than 10% is that if the purchaser defaults, you may not be able to claim the full 10% deposit as compensation.
Often, as a common practice, a Special Condition can be included in a Contract for Sale which states that if the deposit is less than 10% and if the purchaser, by its default, fails to complete the purchase, the deposit is forfeited to the Vendor and the purchaser must also pay to the Vendor the balance of the agreed 10% deposit. Unfortunately there is much uncertainty from the Courts as to whether such a clause is enforceable. Fortunately, default by a Purchaser is a rarity in a property transaction.
But is there a benefit to the Vendor if a 5% deposit is excepted?
Yes! You may have a purchaser that has offered you the price you are looking for however, does not have the cash available for the full 10% deposit. In doing this you are removing the risk of not selling the property or receiving the asking price for the property.
If it is known that you may accept a deposit of less than 10%, this increases the number of potential purchasers that may make offers on your property. In turn, this can result in achieving a higher purchase price, particularly at auctions. The more people making offers or bidding at auction for your property, the greater chance of securing a great sale price.
If you need legal assistance, contact Everingham Solomon’s team of experienced Solicitors because Helping You is Our Business.
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