Is My Deposit or Payment Secured? | Investment Property FAQs | Property Investment in Australia

December 5th, 2023

Putting down a deposit on a property is surely intimidating if you’re unsure whether your money is secure. Empire 8 Property looks at how deposits are handled plus key risks to watch out for.

Where Does Your Deposit Go?

When you pay a deposit on a property like land, a townhouse or apartment, the funds are banked into the developer’s or vendor’s trust account held by their lawyer or conveyancer.

In most cases, your deposit stays safely in this trust account until settlement when the property purchase is complete. At this point, funds are released to the developer and you receive the property title.

Watch Out For Rogue Developers

While most deposits are handled securely in trust, there have been rare cases of people losing money. This is usually when an unscrupulous developer has unlawfully taken deposits to spend themselves without delivering the property.

These types of rogue developers may go bankrupt, leaving purchasers with no legal entity to pursue for refunds if the project fails. Any existing property developer assets or funds are prioritised to banks first, then creditors like deposit holders last.

Doing Your Due Diligence is Key

To reduce deposit risk, thoroughly research developers before paying anything. Check their track record of completed projects and years in business. Are they a well-established company with a reputable history? Or a risky first-time developer with no experience or assets to their name?

While established developers can also fail, they generally pose much less risk than unknown new players without financial backing. Do your due diligence here.

Protect yourself further by only paying deposits once you have finance pre-approval confirmed. This shows you have a lender willing to fund the purchase. If the developer then fails, your risk is lower as finance falling over gives an exit option.

Follow these tips from Empire 8 Property to safeguard your hard-earned deposit money when buying property. Call us for more information!