Real Estate Law

Buying And Selling A Property: Should There Be A Deposit?

Normally, at the time period of the signing of the contract, the terms of the contract dictate whether or not a deposit is required as part of the real estate transaction. It is customary, but not legally essential for the purchasers to pay the Sellers a deposit. The amount of the actual deposit can be negotiated between the parties to the transaction but is normally never more than ten percent (10%) of the purchase price, and is often much less. For example, if the Buyers are borrowing money to cover nearly most or all of the funds needed to purchase the property, they may not have the resources to give a substantial deposit. The general rule is that a Seller normally requires a deposit which is at least adequate to compensate the Seller for any expenses the Seller may incur in the event that the Buyers breach the contract or are unable to close on the property.

Most real estate contracts include certain contingencies or methods for the parties to legally cancel the contract without any ramifications to the Buyers’ deposit. This essentially means that if a Buyer cancels the contract under a permitted right of the contract the Buyer will normally get one hundred percent (100%) of the deposit returned to them.

Deposits are normally held by the title company, the Sellers real estate broker or the Seller’s real estate attorney. In this day and age of low interest rates, the deposit is normally deposited into a non-interest bearing account. In the event that the Sellers require a large deposit, then at that time, the Buyers should consider whether or not to deposit the monies into an interest bearing account. Other factors include the time period from the date of contract to the estimated date of closing. Unless otherwise agreed, any interest normally goes to the benefit of the Buyer or the depositor.

For more information, please contact Blair C. Lane, Sr., at 856-354-7700. Initial consultations are free.