One of the topics that we most frequently receive questions about is the 10% deposit that is payable on any exchange of contracts. A contract for sale stipulates that the purchaser must pay this deposit, which is typically held by the real estate agent until the completion of the exchange.
However, it is not uncommon for a purchaser to be unable to pay the full 10%. In these instances the seller can elect to accept only 5% (or another agreed-upon amount) and a special condition is written into the contract that would allow the seller to claim the full 10% in the event of an aborted transaction.
A deposit bond can be used if a purchaser cannot pay any amount toward a deposit. These bonds are issued by a bank or insurance company and serve as guarantees of payment in the event of a default on the part of the purchaser.
Meanwhile, a “holding deposit” is one made as a show of good faith on the part of the purchaser. This deposit is separate to the required 10% deposit and is refundable should the transaction be aborted.