In these tougher times we have noticed Vendors asking for early release of deposits before actual settlement has taken place. If you have purchased a property and paid a deposit on the unconditional date, we would recommend you think twice before agreeing (and don’t) to any request to release your deposit before settlement.
When a deposit is paid, the real estate agent is required to hold it for 10 days. Vendors often ask agents to release the deposit early to use it as a deposit on another house or to clear some debts etc. The agent can do this provided the purchaser consents.
Be very wary of agreeing to the release because the transaction may not settle (especially in today’s environment!). If the transaction does not settle and the vendor has already spent the deposit, you will have no security and your deposit may be gone forever.
Ensuring that the deposit is held by the Real Estate Agent until settlement is the wise thing to do; especially where there is a mortgage on the title. If there is a mortgage, be aware that the deposit might be needed to settle the Vendor’s mortgage debt, and if released early and spent in other ways, the Vendor might not be able to discharge the mortgage.
Always be very wary of any request to release a deposit early.