Are you buying a house or apartment?
Are you wondering about the deposit you will have to pay, and whether you can get it back if the sale does not go ahead?
Let’s take a look and I will clarify the situation for you.
First, you need to understand that you will pay two deposits:
- A booking deposit to the auctioneer
- The contract deposit
The Booking Deposit
The booking deposit you pay to an auctioneer is fully refundable. You can change your mind about buying the house for good, bad, or no reason and you are entitled to get your booking deposit back.
Just make sure the booking deposit is paid to the auctioneer, not the vendor, and get a receipt confirming it is a booking deposit. You can also, if you feel it necessary, visit the website of the Property Services Regulatory Authority and check the auctioneer is on the public register.
The Contract Deposit
The contract deposit is payable when you sign and return the contracts to the vendor’s solicitor.
Let’s assume you are buying a property for €200,000. The contract deposit will be 10% of the purchase price-that is, €20,000.
So, when you sign the contracts you will have to pay €20,000 less whatever booking deposit you have paid to the auctioneer.
Let’s assume you have paid €5,000 booking deposit to the auctioneer; then you will have to pay €15,000 when you are signing and returning the contracts.
Once the vendor has signed the contracts and returns one part to your solicitor there is a binding contract in place. At this point you will not get your deposit back if you change your mind.
However, there is an exception to this: if your solicitor had inserted a “subject to finance” clause in the contract and the finance does not, for whatever reason, come through then you may be entitled to the deposit back on the basis that there is no binding contract in place as the contract was “subject to finance”.
Be very careful, though: failure to complete a sale can lead to the forfeiting of your deposit.
Also, the vendor can actually sue you for the balance of the purchase price and to compel you to complete the sale-a remedy of specific performance. This will not be of much use, however, if you are simply unable to complete.
But damages will be payable if the vendor rescinds the contract by serving a Completion Notice and you are unable to complete (see below).
In addition, the vendor can sell the property to someone else and if they get a lower price he can sue you for the difference-that is, the drop in value or sales price. First, he needs to serve a Completion Notice on you.
Once the closing date has passed and you have been unable to complete the purchase the vendor can serve a Completion Notice on you. This makes time of the essence in relation to completing the sale.
When the time in the Completion Notice has passed the vendor can rescind (bring to an end) the contract and pursue you for damages and loss arising from your failure to complete the transaction.
Buying at Auction
When you buy at auction the procedure is slightly different. When the hammer falls and you are the highest bidder you will not be paying a booking deposit, but will have to sign the contract and pay the contract deposit.
If you are unable to complete, therefore, you will lose your deposit.
So, you need to carry out all your research about the property you have your eye on before you go to the auction; doing so later on is too late and is a stupid, avoidable mistake. (Learn more about buying property at auction here).
Booking deposits are refundable; contract deposits are not so get professional advice and carry out your due diligence before signing the contract and paying the contract deposit, not after.