Is A Home Deposit Refundable?

1. Can a House Deposit Be Refunded?
2. How to withdraw from a contract during a cooling off period in NSW?
3. Can I lose my deposit on a house?
4. Do you lose your deposit if finance falls through?
5. What is a holding deposit when buying a house?

When buying a house, you typically pay a purchase price that consists of a deposit and the remaining balance. The deposit serves as a sign of good faith, assuring the seller that the buyer will meet the agreement’s requirements. The amount of the deposit can vary and is agreed upon by both parties.

However, what happens if you pay the deposit and then change your mind? Are there non-refundable deposits? It’s crucial to understand the rules regarding deposit refunds in real estate transactions. Below, we’ve outlined everything you need to know about house purchase deposit refunds, including whether deposits are refundable and the implications of non-refundable deposits under Australian law.

Can a House Deposit Be Refunded?

If you no longer wish to buy a property, you may withdraw from purchasing once the contract of sale has been exchanged. This will typically be in the ‘cooling off period’, which is usually 5 business days in New South Wales. So is a house deposit refundable? Yes, but if you have signed the contract and paid a deposit, you will be subject to a forfeiture of normally 0.25% of your purchase price. The balance of the deposit will then be refunded to you. 

Additionally, you will be entitled to rescind the contract and get back the entire deposit amount if: 

• The vendor’s title is found to be defective
• Any statutory warranty made by the vendor is disproved
• The vendor failed to disclose any easement right existing on the property

It is important to note that a caveat generally cannot be lodged to secure the return of a deposit which is refundable under a terminated contract. Navigating the complexities of purchasing property can be difficult. Owen Hodge’s property lawyers are highly experienced in assisting with property sales.

Can you get your deposit back on a house after the cooling off period?

A contract of sale for a residential property must include a statement about the cooling-off period, which is crucial for understanding your rights regarding deposits. You can waive this cooling-off period by providing a Section 66W Certificate under the Conveyancing Act 1919, signed by your property lawyer. However, if the contract lacks this statement, you can withdraw from the sale at any time before it is finalized, even if the cooling-off period has expired. In this scenario, you will be entitled to a refund of the entire deposit without any forfeiture, emphasising the importance of knowing whether your deposit is refundable.

Can you pull out of a house sale before a settlement?

Yes, you can pull out of a property sale before settlement, but you will likely face significant consequences, such as losing the deposit that you put down. In NSW, private treaty sales come with a 5-business-day cooling-off period. During this time, buyers have the option to withdraw from the sale by providing written notice. If you decide to do so, you will forfeit your deposit, which is typically 10% of the final purchase price. The seller is legally entitled to this amount, and you may also need to cover additional expenses, such as the difference between the agreed price and the seller’s resale price.

How to withdraw from a contract during a cooling off period in NSW?

Non-refundable deposit

If you propose to purchase a property in NSW, your ‘cooling off period’ starts on the date of exchange of the contract and expires at 5.00 p.m. on the 5th business day after exchange. In order to withdraw from or cancel the contract of sale during the ‘cooling off period’, you need to follow certain guidelines.

Written notice

To withdraw from a contract within the stipulated ‘cooling off period’, you need to give a written notice to the seller. Setting out the reasons for such withdrawal is necessary. The notice must be signed either by you or your solicitor and must be served either upon the seller or the seller’s solicitor or any other agent mentioned in the contract. However, the notice should be served only during the ‘cooling off period’. 

The service of the notice will be rendered ineffective if served after settlement of the sale has taken place. The notice, once duly served, cannot be revoked except with the consent of the seller.

Fees and costs

On top of forfeiting 0.25% of your purchase price, you may also be liable to compensate the vendor for any loss incurred by the vendor over and above the forfeited amount.