Read Time: 2-3 minutes
Selling and buying property is like building a house. If you don’t get the structure and foundations right, things can fall apart quickly.
One of the biggest hidden dangers in this process?
Getting your initial deposit payment wrong.
Let’s say your client is selling a $1 million property in Auckland and upgrading to a $1.2 million home. The common expectation? Use the deposit from the sale to fund the deposit for the purchase.
But here’s where things get tricky:
1. Deposit Delays: The deposit from the sale is held by the real estate agent for 10 working days before it’s released to the seller — unless an early release clause is agreed upon before signing the agreement.
2. Less Cash Than Expected: A 10% deposit on a $1 million property should mean $100,000, right?
Wrong.
After the real estate agent’s commission (let’s assume $30,000), only $70,000 remains.
3. A $50,000 Shortfall: Your client now needs $120,000 for the deposit on their purchase — but only has $70,000.
Without proper planning, a seller can end up in two nightmare scenarios:
Most people assume:
The best way to avoid disaster? Plan early and have backup funding.
Here’s what your client needs to do:
1. Talk to the bank before selling. Arrange an overdraft or short-term funding facility for at least 10% of their expected purchase price.
2. Negotiate an early release of the deposit. Ensure the agreement includes a clause allowing the real estate agent to release funds before the standard 10-working day holding period.
3. Understand the actual numbers. Factor in the agent’s commission so they know exactly how much cash will be available.
If their next purchase is an auction, they’ll need the full 10% deposit upfront as soon as they win the auction. There’s no conditional period, no finance clause—just cash on the day.
✔️ Contact the bank early and arrange backup funds.
✔️ Ensure an early release of the deposit is in the sale contract.
✔️Account for real estate commission when calculating available cash.
✔️ Have cash ready if purchasing at auction.
✔️ Speak to a lawyer before you sign any agreements
Selling and buying at the same time is a high-stakes game. Get the deposit structure right, and you’ll avoid financial chaos.
