Buyers and sellers in the Irish residential market are vulnerable in our dual deposit system
Overseas buyers in the Irish residential market are generally confused about our dual deposit system. It appears to be very different, and perhaps illogical, when compared with the buying processes in other developed markets.
When a potential buyer makes a successful offer on any property, the first stage of formalising that agreement between the buyer and seller is for the buyer to pay to the seller’s estate agent a booking deposit. This booking deposit is generally in the region of 1.5 percent, usually the equivalent of the estate agents fee, and is payable immediately. The deposit is fully refundable in each and every instance, from finance falling through or house falling down, to a simple case of buyer’s remorse.
The next formal stage is for the buyer to sign the contracts for sale, as issued to their solicitor, usually within a period of 10 to 14 days. At the time of signing the contracts, the buyer is obliged to pay a further sum, called a contract deposit, usually the balance of 10 percent (this may be reduced to eight percent where the buyer is availing of a 92 percent mortgage). The payment of this second deposit represents a binding contract, when the seller also signs their part of the contract. It is legally binding and is only refundable is specified instances.
In other jurisdictions, the initial booking deposit generally has a binding effect on both parties and this decreases fall-through rates, which are creeping up again in the Irish market. Read more…