In these tougher times we have noticed vendors asking for early release of deposits before actual settlement has taken place. If you have purchased a property and paid a deposit on the unconditional date, we would recommend you think twice before agreeing (and don’t) to any request to release your deposit before settlement.
When a deposit is paid, the real estate agent is required to hold it for 10 days. Vendors often ask agents to release the deposit early to use it as a deposit on another house or to clear some debts etc. The agent can do this provided the purchaser consents.
Be very wary of agreeing to the release because the transaction may not settle (especially in today’s environment!). If the transaction does not settle and the vendor has already spent the deposit, you will have no security and your deposit may be gone forever.
Ensuring that the deposit is held by the real estate agent until settlement is the wise thing to do, especially where there is a mortgage on the title. If there is a mortgage, be aware that the deposit might be needed to settle the vendor’s mortgage debt. If released early and spent in other ways, the vendor might not be able to discharge the mortgage.
Always be very wary of any request to release a deposit early.
I would like to say thank you for the opportunity for allowing me to come to the property school at Gilligan Rowe + Associates. Im in my early stages of becoming a property investor in New Zealand and to able to come to the property school has enabled to me gain very valuable information and knowledge which will help me be successful in property investing. The property school itself is one like no other because there is so much value given and from experts that practise what they are teaching. This in property school was one of the main highlights because being able to meet experts through the property school was my first time and gave me more confidence in general about property investment. Having combined reading the books (Property 101, Tax structures 101) at home and attending property school, the breath of valuable information and knowledge I have attained is substantial. - Tesfalidet, December 2019
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