This was our very first posting on the Australian Real Estate Blog, almost a year ago. We reproduce it for two reasons. First, the problem has become worse. Second, a recent experience suggests that the holding deposit is being used to penalise purchasers, and creates an opportunity for theft.
A client recently engaged me to act for her in submitting her offer and negotiation her purchase of a home unit. I had been warned by the client that the estate agent was a bully, and that she would be difficult to deal with. I prepared the client’s offer and faxed it to the estate agent, requesting that it be put to the vendor as soon as possible (as required under the Estate Agent Regulations).
The estate agent telephoned me and explained, “We don’t put any offers to vendors unless we have a holding deposit of at least $500.”
I was forced to explain to the estate agent that her demand for a holding deposit in the circumstances was improper, unprofessional, and highly illegal. The estate agent quickly backed down, and submitted my client’s offer without any further nonsense.
Now, here are the facts. The contract determines how much deposit is to be paid, and the date by which it is to be paid. The agent has no say in the matter at all. An agent who refuses to submit an offer to the vendor is not acting in the vendor’s best interests, and breaks the law by failing to communicate the offer to the vendor as soon as possible.
Why does the estate agent demand a “holding deposit” from the purchaser? The sole purpose is to control the purchaser. The vendor can still sell the property to someone else, so the holding deposit is of no benefit to the purchaser at all. But, by taking hundreds of dollars from the purchaser, the estate agent creates something of a psychological hold over the purchaser, so that the purchaser is less likely to change their mind. Add to this is the knowledge that “cooling off” involves as loss of money, and the control becomes even stronger.
If any estate agent ever tells you that you must pay some form of holding deposit in order to have your offer submitted to the vendor, ask that the demand be put in writing. This will usually help the estate agent to remember the Estate Agent Regulations.