Deposit

The deposit is a payment made by the buyer to demonstrate commitment to the property purchase. In New Zealand, the standard deposit is 20% of the purchase price, though this can be negotiated. The deposit is usually paid in two stages: an initial deposit (often $1,000 or a smaller amount) when the agreement is signed, and the balance of the deposit when the agreement goes unconditional.

The deposit is held in a trust account — usually the real estate agent's trust account or a lawyer's trust account — until settlement. At settlement, the deposit is applied toward the purchase price. The balance is paid by the buyer (or their bank, via mortgage drawdown) on settlement day.

Note that the deposit is separate from your mortgage deposit (the equity you need to have). Your mortgage deposit is the difference between the purchase price and the amount the bank will lend you (e.g. 20% for most buyers). The contractual deposit paid to the agent is part of this amount.

Understand the deposit requirements before making an offer. If you can't pay the required deposit, you may need to negotiate a lower amount with the seller — but be aware that a lower deposit can make your offer less attractive.

Be clear on when the deposit is payable. The initial deposit is usually due within 2-3 working days of signing the agreement, and the balance when the agreement goes unconditional. If the agreement is cancelled while still conditional, your deposit should be refunded. However, if you pull out after going unconditional, the seller may be entitled to keep your deposit.

The deposit amount and payment terms are specified in the sale and purchase agreement. Your lawyer will advise you on the deposit requirements and ensure funds are paid to the correct trust account. Confirm with your bank that you have the deposit funds available before making an offer.