It’s something that lawyers and agents deal with every day, so perhaps we take it for granted, but lately we have been having quite a few dramas with deposit payments and the early release process.
This mainly seems to be occurring when vendors are purchasing a new property, and planning to use the deposit from their sale to pay the deposit for their new purchase. Miscalculations and timing issues are causing unnecessary stress for clients – and us! So, what can we do to avoid the drama?
Firstly, better understand the clients’ plans and financial position. You probably already have a chat about their plans and where they’re heading once they sell.
Perhaps something like: “Oh, so you’re moving North for work? Are you planning to rent or buy there? Have you found anywhere yet? What’s your timeframe? Will you need the deposit from this sale for that purchase, or do you have some savings?”
The next thing is timing. Clients may not know about the 10-working day period that agents have to hold the deposit for. We also can’t rely on the purchasers agreeing to an early release. Some clients are just risk averse and sticklers for the rules. It might be possible to put a clause into the Sale Agreement requiring purchasers to authorise early release, or advise them to put a clause into their Purchase Agreement delaying deposit payment for 10-working days?
Finally, there’s the amount. A surprising number of clients don’t realise, or forget, that the real estate agent’s commission and marketing fees come out of the deposit before it is paid out to them. If your sale deposit is $50,000 and you need to pay a $50,000 deposit on a purchase, I’ve got bad news – you’re going to come up short once commission comes out of that first sum.
Even those clients who do know that the commission is coming out of the deposit sometime trip up on calculations by forgetting that GST is usually added on top of the commission percentage, as are advertising disbursements. It might be helpful for agents to provide clients with estimates of commission for different purchase prices, rather than leaving it up to the accounts department to calculate it on the deposit release day.
We find that highlighting all these possible oversights early on – almost overcommunicating with clients, is actually often appreciated. Also, it might minimise the number of those early release forms you have to send us…