How Strict Are Estate Agents with The 10% Deposit Rule upon Winning an Auction?

Planning to bid in my first online property auction this weekend in VIC.

Was wondering how strict are the agents nowadays with the 10% deposit rule?

If the property is sold for $1.5m, am I expected to pay $150k on the Saturday I win? Am I able to negotiate a payment plan to stretch it out until next Friday (eg: 20k per day)? How flexible are the agents with negotiation on the deposit payment terms?

Reason for asking this is with interest rates at 0.1%, I don't really want to keep $150k+ in cash for the chance I "may" win something. My assets are currently mostly in ETFs which need T+2 settlement and plus withdrawal time.

Update: I've registered to bid on a couple of properties and spoken to the respective REA, one said 5% is fine. The other said 1% is ok on auction day and 9% balance the next Friday.


  • +1

    When we purchased our house 5 years ago, we asked the agent for $150k initial deposit regardless of how much the final price was and it was accepted.
    Generally you do this prior to Auction and not post.
    Houses are usually on the market for 4 weeks so if you do find your dream house, it should give you plenty of time to sell down your EFT and get the deposit in time. the REA will do a lumpsum withdraw from your bank as opposed to waiting for you to transfer the money.

    As many people have recommended, it is much easier and respectable to negotiate the terms prior to bidding. Understand EFT is better but assuming you took the money out 3-4 weeks ago, you are probably better off with the cash in this particular point in time.

  • +1

    Solicitor here you must ask your conveyancer/solicitor to negotiate the terms (deposit amount and settlement time etc) prior to the auction, even if you ask the agent its best to have it communicated with the Vendor Solicitor so that they are in the loop. If you fail to do so and you win the auction , you will not be able to negotiate anything afterwards because the contract is now unconditional (you waive the cooling off at the auction).

  • +9

    mate, we are just going around in circles.
    There are plenty to people here, and elsewhere, that have purchased $1.5 - $2m properties and have paid the 10% deposit without any issues.

    I understand that if this is your first purchase at an auction you might find it a strange and different process than what you're used to. You'll find Real Estate Agents are very helpful and can answer all your questions. If you're seeing a few houses a week, direct the same questions to the difference REAs and you'll see the sector works.

    You are generally able to negotiate different terms of deposit PRIOR to the auction. Others here have given examples of what they done, and what might be reasonable terms for your to negotiate on. eg 5%

    BUT it is a seller's market at the moment. Sellers don't necessarily have to agree to your terms. Likely you've never purchased something like this before. Homes aren't the same as shares and crypto or whatever else you may have purchased in the past. Houses are unique and one of a kind, (apartments and townhouses are different), but this is why YOU CAN negotiate terms.

    And FYI, many people, especially those who are upsizing, do have $100-$200k sitting as cash in the bank. Generally in a offset account that reduces their current mortgage, so it's about a 3% return.

    • -2

      Spot on about the offset accounts. 1.5M sitting in our offset accounts.

  • +4

    Another Joker.

    • +1

      Look I don't have the money liquid right now, best I can do is a slab of VB and $50, then the rest in installments over the next 6 months, any issues?

      • -4

        i think 20k is worth more than a slab

      • +2

        VB? VB? Mate if I was the REA I'd at least want Southern Comfort at current house prices.

  • -1

    150k cash and bidding on a 1.5m property hahaha you need to go see a mortgage broker mate

  • +14

    Expecting OP to post a new thread next week "Bought house at Auction, now vendor won't negotiate contract"

  • Boss go and talk to the agent and a broker instead of chilling on ozbargain.

  • This thread has gone a little south but, noticing that you say you can pay the whole lot in cash by liquidating shares -

    When you do sell shares to pay for the rest of the house just keep in mind that the government deposit guarantee is limited to 250K per person per ADI. It's worth spreading your risk over multiple banks (not subsidiaries) just in case we have bank failures in the time that you are about to settle on your property.

    My personal opinion is that one or all of our banks will go under at some point in the next 20 years. If I knew when I could make myself very rich…

  • +1

    Every property i have sold bought.

    We always negotiated 5% in the contract prior to making an offer

    Same with selling, Typically Purchaser's conveycer reaches out to ours and requests 5% deposit.

    • Thanks, so you actually engage the conveyancer before the auction? What if it doesnt sell, do you still need to pay conveyancer fees?

      • +2

        Depends on the agreement, I think mine included up to 3 contract reviews/negotiations for one price then additional costs for more

      • +2

        If you don't have someone checking the contract before the auction you're doing it wrong. By the way you may also want pest and building inspections before you bid too.

        That's part of the costs of an auction, you pay for these things beforehand to make sure you're not screwed afterwards.

        • In this market, there is usually no time for pest and building inspections. And by the time you've inspected your 20th property, you would have wasted $5k.

          • +2

            @mrvaluepack: As I said:

            That's part of the costs of an auction

            If you don't get the inspections, don't complain if there are issues when you move in.

            Honestly, it's part of why I turn away from property auctions. They're fine for some, but I want to get it checked properly and if there are issues you can negotiate or pull out. If I get it inspected before the auction, it could just be a waste of money.

            • @dizzle: Problem is 90% of the properties in the areas i want are all auctions. Private sales only available if it gets passed in auction.

          • +4

            @mrvaluepack: Houses are on the market for several weeks before auction, there is plenty of time for pest and building before auction. You only pay for it when you plan to bid and if you are really bidding on 20 properties without winning that's on your end. You either bid to win in a hot market or you sit it out. You don't turn up to 20 auctions hoping the next one will be different, it aint happening. You do you but buying blindly without inspection and then discovering problems will cost you way more than 5k.

            Also, your ETF portfolio can swing either way and by a lot more than 0.1%. Market was down 3% recently due to the China construction thing.

            Between having your deposit sitting in ETFs and your attitude towards building and pest I urge you to go over the basic concepts of risk otherwise I see another thread started by you in the near future and it won't be pretty.

            • @baker bob: ETF are more important than building inspection or checking the contact.

              • +1

                @snirodha: The market peaked on 13 August. Anyone with ETF today are worse off than 13 August. That doesn't matter to 99.9% of us who are holding for the next 5+ years, it matters to anyone that is planning to use those funds in the short term. The OPs whole argument that he is losing opportunity by having his deposit in a bank account has gone out the window which is why I stress he needs to understand risk better.

                Also important to understand why the market pulled back from 13th Aug and that issue is still unresolved so still potential downside.

              • @snirodha: That depends on if you want your own house to live in

      • Yes your conveyancer will charge a fee for their work. But its a small price to pay if you are looking to drop big money on a property

    • I bought a property at start of this year. After the contracts were signed, the agent let slip one reason I beat out the other interested party was that they could only offer a 5% deposit. Concern will vary between vendors and people advising them of course.

  • +3

    You’re getting good and reasonable advice from a lot of people. They’re saving you from what would be a default. Is that more or less than any interest and/or earnings saved?

    I think you’re better off buying your home that isn’t via an auction.

  • +1

    Do some research on a deposit bond - that's what we used for our house purchase. There are a few companies that do them.

  • +1

    When we sold our house we had a number of interested buyers go through their conveyancer the day before the auction to negotiate 5%

  • +1

    "Common - I'm good for it."

  • You can generally do the transfer the next business day. I did that. Not stretch it over a whole week.

  • We paid about 3% on the day (max transfer amount), and then the rest on the following Monday

  • The standard is 10%. But in Sydney I've never paid more than 5%. Never been offered more than 5%. My feeling is 5% is the new 10% for Sydney prices at least.

  • +2

    You might want to call up afterpay and see if they can help.

  • +1

    I've always paid via transfer the next business day. Never had a problem. Never had to pay 10% either.
    They want the sale just as much, if not more, than you want the purchase.
    No-one wants lawyers involved (except with the conveyancing). Keep it real.

    • -2

      That's what I've always thought, this is a business deal. Business deals can usually be flexible to accommodate the customer.

      • +2

        Don't assume. Ask beforehand.

  • +1

    have a chat to the REA. Normally a grand or two on the day and balance the next business day is OK.

  • +2

    Real Estate Agent from SA here. Disclaimer: Idk about other states.

    We are not too fussed. Most of the time 5% is fine. 10% is pretty standard though. We expect you to pay as much as you can on auction day, e.g $5,000. The remaining to be paid on the next business day when the banks open.

    Also there's a weird rule. We are not allowed to collect more than 3 deposits. If the deposit is $80,000. We cannot take 4x $20,000. If we take that, we need to refund all the money back to you and ask for it again in 3 payments. No idea why as the accounts lady normally handles it but its just in the act.

    • You can transfer 100k a day (cba)
      Call the bank, then they will raise the limit for you.

  • +1

    Bought a few through auction (Melbourne), only once had the 20% on hand.

    You MUST however call the real estate the week prior, advise you will be bidding if they would take a deposit of $xxk. Be upfront, realistic and transparent on how much you’ll have on the day.

    Based on your finances also discuss when the balance of the deposit can be paid.

    If you’re fortunate and they confirm that it’s ok, thank them and shift it to email asking for them to confirm in writing.

  • +3

    Parking house deposit in equity is a terrible way compared to earn 0%. Equity market is volatile in the short term so it is extremely bad to park house deposit there. I would sell you etf crypto shares whatever assets you have right now and find a house per day. Doing 20k sell down per day after winning the bid is so risky, you are forced sell situation and the market can tank 1-2% per day easily.

    • Absolutely. Crazy he is even doing that with what Evergrande news has done to the market recently.

    • +1

      You are making a lot of assumptions. No reason to think OP does not have far more than the house deposit he needs parked in investments. a 20% drop may have no bearing on their ability to pay the deposit.

      • OP mentioned he wants to sell ETF to pay for deposit, it's bad no matter how you want to see it. If he has spare cash, use the cash leave the ETF there, don't touch it.

      • If you read his OP and some of his replies, he feels that having the deposit in the bank he is missing out on the gains he would otherwise be making in the market. He is assuming there are gains and totally ignoring the risk of the market moving the other way before he settles. Given the market peaked on 13th August, the OP is actually worse off now than he would have been on 13th August. The market downside is being driven in part by what is happening in China which remains unresolved. It seems OP is ignoring this and assuming his ETFs are going up.

        • Good grief. Look, i agree OP is reckless and bullish but you are just wrong.

          Firstly, many ETF's are up since mid-August. Secondly, you have absolutely no idea of OP's circumstances. What if they have $50m in the market and the downside to a 20% drop will have no impact on their lives yet they are bullish in the short term and want to maximise their gains - it is just their investment thesis and the downside may well have no impact on anything they are looking to achieve.

          • @bman20: Good grief indeed. Why is this so difficult for you to grasp. Read his comments in the OP where he states that he doesn't want the deposit in a bank account due to low return. By placing that particular sum in an ETF he actually got a lower return than a bank account in the short term. Its irrelevant if he has 50 trillion in ETFs.

            The market is down since August, without knowing what he holds assumptions need to be made. Seeing as almost anyone holding ETFs have at least some global index or all ords tracking fund, he is down short term.

            We are not talking about bulls, bears and hindsight, we are discussing risk management. Do you understand this concept?

            • @baker bob: Again, many, many ETF's have gone up over the last 6 weeks - what you are saying has no basis. 'The market is down' does not mean everyone is down, but you know that.

              Yes, i am very familiar with risk management. Risk management, as you would know, is very relative to your circumstances. If you have a net wealth of $1bn, the way you invest and manage a $1m investment is very different to the way someone with a networth of $5m would manage the same money. Risk management is not some rule of thumb that you may have learned in a facebook group. It is about taking measures to reduce the risk to a level you are comfortable tolerating - OP is very clearly comfortable having his money locked up in ETF's as the swings have no impact on his day to day life and he is confident that in the short term, his ETF's will outperform his bank. He is making a bet and it clearly sounds like he can handle any outcome that comes from this bet - his risk is effectively managed.

              • @bman20: No one said the bet on ETF is wrong. But selling it now and get it ready to buy is better option than waiting to sign the contract and sell. One is managed expectation, one is really gambling. If he has the money to pay off the deposit, then this question should not be asked at all.

                • +2

                  @od810: Why is it a better option for OP to sell now? They think there is more chance it will go up than go down and they can afford either outcome without it impacting their lives.

                  The attitude you are projecting is that of an average Joe with an average net wealth. This is very clearly not OP's situation with the significant sums they are mentioning and the fact that they can withstand a 50% drop in markets. You are talking about money management theories that a mum and dad should be using when OP is clearly a sophisticated investor with a substantial net wealth. If your net wealth halved you would clearly be in strife - OP is vastly different and therefore has the luxury of using different risk management strategies.

                  For the average person who has to work for 15 years to save up for a deposit, your comments are sound. For someone who could afford to purchase multiple properties if they wanted to without any debt, it is misguided. there are numerous reasons why OP would still take on debt even if they can afford to retire many times over.

                  Yes, it is definitely a gamble but i am not sure what the point of this is. It is OP's money and they can stomach the outcome of the gamble whichever way it goes, if they have conviction then power to them. You criticizing this strategy is simply a failure to understand the circumstances of a high net wealth individual.

      • -2

        You are correct. As mentioned in my previous posts, I plan to pay for the house without financing and even if the markets fall by 50%, it will have no bearing on my ability to pay for the property.

  • This reads like those FB/Gumtree stories of horror buyers

  • +2

    I say this with the best intentions, you really should not be going to an auction if these are your questions. It sounds like you have not engaged a conveyancer which is reckless as this is something they handle for you and provide advice on.

    A conveyancer is 'cheap' for the peace of mind they offer, particularly on matters like this. If you dont know the answer to your question, you have not read the contract which is something the solicitor takes on for you.

    This is not a matter of opinion or feeling, it is a matter of the contract you have negotiated with the vendors solicitor. You need to settle on this prior to lodging a bid.

    The default contract may well require 10% immediately and they vendor may well have recourse if you are not able to provide payment immediately.

  • Usually you have a day or two to get the 10% to them you can always negotiate pre-auction and advise you're only willing to bid at the auction due to xyz reasons if the vendor say no then you simply must accept there terms or find a different property

  • I bought a house at auction over the phone, when I was at the Malaysian F1 GP a few years back, I had sent someone along to put their hand up, the agent kina freaked out but we came to terms, nothing they could do anyway.

  • I bought a house, then invited the agent to come over to my place later that and wrote him a personal cheque for the deposit. It wasn't an issue.

    • Did you pull the old "Oh no, it looks like I'm out of money. Is there any other way we can work this out"?

  • What if the stock market crashes the moment/just after you win the auction and your ETF portfolio falls by 10%. Albeit rare, will you still be putting through your deposit? Best to reallocate to cash and sort out payment options when you are starting to look IMO.

  • I approached a selling agent as wanted to purchase a house being auctioned. Had signed a contract to sell my current house and my solicitor was holding the deposit that I could use for a deposit. The selling agent refused anything beside full 10% on the Saturday of auction, which couldn't happen as my solicitor couldn't action it on a Saturday. Stupid rule and the seller would have missed out on the best price because agent just did not care.

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