Is my deposit safe?

How do you know your deposit is safe?

One of the things that can concern people when they’re buying a house is the deposit – how do you know it’s safe and won’t be paid out to the vendor before the sale completes?

Two deposits are generally paid during a house purchase – the booking deposit and the contract deposit.

While both are paid before the keys are handed over, you don’t have to worry about losing them.  The law has put specific provisions in place to make sure they are safe.

The booking deposit is paid to the estate agent when the sale is agreed.  So you might pay them a few thousand euro to secure the house.  Paying the booking deposit essentially means that you intend to go through with the purchase.  It tells the vendor that you’re not just someone who goes around viewing houses and never commits to a purchase.

Once the booking deposit has been paid, the estate agent will write to your solicitor, telling them that the sale has been agreed and that they should expect contracts to be delivered.  At the same time, they’ll notify the vendor’s solicitor that the contracts should be sent out.

So at this stage, the estate agent holds the booking deposit for you – and that’s all they are allowed to do.  They can’t pay it out to the vendor or their solicitor.  They’re obliged to hold it on trust for you.  They will only release it to the vendor once the sale has completed and if, for any reason, the sale doesn’t go through or you decide not to sign contracts, then the booking deposit must be returned to you with no deductions.

When it comes to the contract deposit, things are slightly different.  As the name suggests, the contract deposit is paid to the vendor’s solicitor when the contracts are being signed.  Once they’ve been signed, you are legally bound to complete the transaction.  The vendor’s solicitor then holds the deposit as stake-holder.  This means that they are personally responsible to both the purchaser and the vendor for its safe-keeping.  On occasion it might be agreed between the vendor and the purchaser that the vendor’s solicitor will not hold the deposit as stakeholder but will instead pay it to the vendor prior to completion but if this is the case then a special condition must be inserted into the contract, setting out the position and confirming that the purchaser is in agreement.

In general, however, it is only when the sale completes that your money is paid out to the vendor.  Once the keys are handed over to you, the entire purchase monies will be paid to the vendor (less any mortgage that they may have had in place and which now needs to be redeemed).

If the property is being sold by auction, then contracts are signed on the day of the auction and the contract deposit is held by the vendor as stakeholder from that date.

So you don’t need to worry about the money you pay at the booking and contract stage.  The vendor’s solicitor and estate agent are both bound to hold it in trust and it is only on the closing date that it will be paid out to the vendor.

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