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Why 10% House Deposit?

txt: Why do most solicitors seek a deposit of around 10 percent of the cost price of a house in advance of purchasing a house? Is it to make a profit on the interest at the buyers expence?

Profit is not the motivation here.  House purchase is like anything else – if you intend to buy a car and you want to get it tested – the garage will usually ask you for a deposit just to show your good faith.  The deposit should be returnable if the deal does not go ahead for good reason.  This is so with property and the 10% represents that good faith – the seller’s Solicitor holding the money as stakeholder (as an independent party) with a bonded guarantee that the deposit will be returned if the deal does not go ahead for valid legal reasons.

 

With interest rates so low at the moment I know that Solicitors make very little on the interest of the deposit and in return they have to lodge the money specifically to a trust account, which is subject to audit and administration expenses.  This in my experience costs far more than the actual interest earned.  In reality the seller’s Solicitor provides it as part of the service with very little compensation. 

The issues raised in the answer to this NewsTalk listener's question are dealt with in a general way as can only be the case on live radio. Before relying on the advice given in this answer, whether you heard the broadcast or are for the first time reading the issues here please do not rely on the broad advice given. For a detailed professional opinion please consult a qualified legal advisor and for further details read our disclaimer on the Home Page.

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