How Much Do You Need for a House Deposit? A Conveyancer’s Guide for Melbourne Buyers

Buying a property in Melbourne is a big step, and one of the first things you’ll need to get your head around is the property deposit. As conveyancers, we see this part of the process trip up plenty of buyers, especially those new to the game. It’s not just about handing over some cash it’s a legal commitment with rules and quirks that can make or break your purchase. This guide breaks it all down from our perspective at Pearson Chambers Conveyancing, giving Melbourne home buyers a clear picture of what to expect. Let’s dive in and explore everything you need to know about deposits, from the standard 10% to special cases and beyond.

The Standard 10% Deposit Requirement

When we talk about a “deposit” in property transactions, we mean the chunk of money you pay the seller when you both sign the contract of sale. Traditionally, this sits at 10% of the purchase price, and there’s a good reason for that. Legally, it’s the amount the seller can keep if you back out after the agreed completion date without a solid excuse. It’s your way of showing you’re serious, and it gives the seller some security.

For Melbourne buyers, this 10% can add up fast. Here’s what it looks like in real numbers:

On a $700,000 property, you’re looking at $70,000.
For a $1 million home, that jumps to $100,000.

As conveyancers, our job is to make sure this money is handled properly under Victorian law. We double check that the contract spells out the terms clearly, so you’re not left guessing about what happens next.

When and How Deposits Are Paid

So, when do you actually need to pay this deposit? In most cases, it’s due when the contracts are exchanged meaning you and the seller have both signed, and the deal is locked in. At that point, the deposit gets held in trust by one of these options:

The real estate agent’s trust account (this is the usual go to).
The seller’s solicitor’s trust account.
A third party stakeholder account in some cases.

This setup keeps the money safe until settlement, when it’s handed over to the seller after the agent takes their cut. It’s a system designed to protect everyone involved.

Here’s something to watch out for in Victoria: sometimes, agents ask you to sign the contract when you make an offer, even before the seller agrees. Don’t worry, though the deposit doesn’t usually need to be paid until both signatures are on the page and the contract is binding. We’ll guide you through the timing so you’re not caught off guard.

Variations to the Standard 10% Deposit

While 10% is the classic amount, things aren’t always that straightforward in Melbourne’s property market. With prices climbing, we’re seeing more buyers and sellers agree to smaller deposits, like 5% or another negotiated figure. This can help buyers who don’t have a huge pile of cash ready, but it comes with some legal twists we need to unpack.

For sellers, accepting less than 10% means less protection if the buyer pulls out. Some contracts try to cover this with a clause saying the buyer has to top up to 10% if they default, but here’s the catch: recent court rulings suggest these clauses might not hold up. They could be seen as unenforceable penalties. So, as conveyancers, we tell sellers that if they take a lower deposit, that might be all they get if things go south.

For buyers, a smaller deposit can be a lifeline, but you need to know what you’re signing up for. That’s where we step in making sure both sides understand the risks and the contract reflects what’s been agreed.

The Legal Status of Deposits in Property Transactions

Deposits aren’t just money they’re a legal tool with a few key roles:

They’re a part payment towards the purchase price.
They act as security for the seller.
They prove you’re committed to the deal.

If you can’t follow through to settlement without a valid reason, the seller can usually keep the deposit, up to that 10% mark. This is called forfeiture, and it’s a big deal in conveyancing. That said, we don’t see it happen often. Most buyers we work with in Melbourne get to settlement without a hitch, and forfeiture is more of a rare exception than a regular worry.

Holding Deposits vs Contract Deposits

There’s a bit of confusion out there about different types of deposits, so let’s clear it up. You might come across two terms: holding deposits and contract deposits.

Holding Deposits: These are small sums like $1,000 or 0.25% of the price that an agent might ask for when you make an offer. It’s a sign you’re serious, and if the seller says yes, it gets rolled into the full deposit later.
Contract Deposits: This is the big one, usually 10%, that you pay when the contract is signed and binding.

To make things trickier, buyers sometimes talk about their “deposit” when they mean their total contribution like saying, “I’ve got a 20% deposit.” In conveyancing terms, that’s actually your equity, with the rest often coming from a loan. We’ll help you sort out what’s what so you’re not mixing up the lingo.

The Conveyancer’s Role in Managing Deposits

At Pearson Chambers Conveyancing, we’re all over the deposit process. Here’s what we do for you:

Advise on how much deposit makes sense and what it means for you.
Check the contract to ensure the deposit terms are fair and legal.
Sort out when the money needs to move and make sure it’s ready.
Help negotiate a lower deposit if that’s on the table.
Confirm the funds are sitting safely in a trust account until settlement.

Our advice? Don’t sign anything or hand over cash until we’ve had a look at the contract. Practices can differ across Melbourne, and we’ve got the experience to spot any red flags.

Special Considerations for Different Purchase Types

Not all property deals are the same, and the deposit rules can shift depending on how you’re buying. Here’s a quick rundown:

Auction Purchases: If you win a Melbourne auction, the 10% deposit is due right there and then. There’s no cooling-off period, so you need your finances lined up before the hammer falls.
Off the Plan Purchases: These can have flexible deposit setups sometimes a smaller upfront payment with more due later, or even staged payments tied to construction milestones.
Private Treaty Sales: The most common type, these stick to the 10% standard but leave room for negotiation if both sides agree.

We’ll walk you through what applies to your purchase, so you’re not caught out by the specifics.

Conclusion

Getting a handle on property deposits is a must for any Melbourne home buyer. The standard 10% is still the norm, but with the market shifting, smaller deposits are popping up more often. What matters most is knowing what these amounts mean legally for you and the seller. From our conveyancing viewpoint, deposits are more than just cash; they’re the glue that holds a property deal together and keeps both sides safe.

Having a skilled conveyancer in your corner makes all the difference. We’re here to explain the ins and outs, review your contract, and ensure your deposit works for you. At Pearson Chambers Conveyancing, we’ve got years of experience helping Melbourne buyers like you, and we’re ready to make your property journey as smooth as possible.

Want to chat more about deposits or get a free Section 32 contract review? Reach out to us today:

Phone: 03 9969 2405
Email: contact@pearsonchambers.com.au