One of the first questions every Victorian property buyer asks is: how much deposit do I actually need? The short answer is 10% of the purchase price, payable when you sign the Contract of Sale. But the full picture is more nuanced than that — and understanding it can save you money and stress.
The standard 10% deposit
In Victoria, the standard deposit is 10% of the purchase price. If you're buying a property for $800,000, that means $80,000 is due at the time of signing. This deposit is typically paid to the real estate agent, who holds it in a trust account until settlement.
The deposit serves two purposes. First, it demonstrates that you are a serious buyer. Second, it provides the vendor with security — if you default on the contract without a valid reason, the vendor may be entitled to keep the deposit as compensation.
Can you negotiate a lower deposit?
Yes. While 10% is standard, it is not a legal requirement. Many buyers successfully negotiate a reduced deposit of 5% or even less. This is particularly common for first home buyers who may have enough savings for a home loan deposit but not enough to also tie up 10% with the vendor.
A lower deposit must be agreed to by the vendor and written into the Contract of Sale. Your solicitor or conveyancer can negotiate this on your behalf. Keep in mind that vendors at auction are less likely to accept a reduced deposit, as the competitive nature of auctions gives them more negotiating power.
Deposit bonds and guarantees
If you do not have the full deposit available in cash, you may be able to use a deposit bond (also called a deposit guarantee). This is an insurance product that acts as a promise to pay the deposit at settlement, rather than upfront.
Deposit bonds typically cost between 1% and 2% of the deposit amount. For a $80,000 deposit, that means $800 to $1,600. Not all vendors accept deposit bonds, so check with the agent before relying on this option. At auction, vendors rarely accept them.
When is the deposit due?
For a private sale, the deposit is usually due when you sign the contract. Some contracts allow a split payment — for example, $1,000 on signing and the balance within 30 days.
For an auction purchase, you typically need to pay 10% on the day of the auction, immediately after the hammer falls. This is usually by personal cheque or bank cheque. Some agents now accept electronic transfers on auction day, but confirm this in advance.
What happens to the deposit during the cooling-off period?
If you buy via private sale and exercise your cooling-off rights, you will forfeit $100 or 0.2% of the purchase price (whichever is greater). The remainder of your deposit is refunded. This is one reason why some buyers prefer to pay a smaller initial amount on signing.
What happens if the contract falls through?
If the contract is ended due to a legitimate special condition — for example, your finance is not approved and you have a subject-to-finance clause — your deposit is returned in full. If you simply change your mind after the cooling-off period has expired, the vendor may keep the deposit and potentially sue for further damages.
Early release of deposit
Some contracts include a clause allowing the vendor to access the deposit before settlement. This is known as early release of deposit. It is more common in off-the-plan contracts. Be cautious with this clause — if the vendor becomes insolvent before settlement, recovering your deposit can be very difficult.
Your solicitor should flag any early release clause during the contract review. If possible, negotiate to have this clause removed.
Ready to check your contract? Upload your Section 32 or Contract of Sale at precontractreview.com for a pre-contract check — typically in just a few minutes.