Property 101 - Why is the Deposit Held by the Agent and When Do I Pay the Agent’s Commission?
Why is the deposit held by the agent?
The agent will usually hold the deposit on trust for the purchaser as a stakeholder for both parties. This means both parties must authorise the agent to handle the funds. If the settlement period is only a month or two the deposit will likely be held in the agent's trust account. Held in this way, no interest will be earned on the deposit. If the settlement period is extended, the parties may agree that the deposit be invested in an interest bearing account.
When do I pay the agent's commission?
The agent is paid their commission once the settlement has taken place. The agent will pay their commission from the deposit that they are holding. If they do not hold the deposit, for example if the deposit was paid with a deposit bond, the vendors solicitor will organise for a cheque to be drawn in favour of the agent for their commission from the proceeds of the sale at settlement .
Please note the answers provided are for your general information only and we ask that you call our office on 02 6331 2911 to obtain detailed legal advice for your individual situation.