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Why A $7,000 Deposit Can Be Enough · That Home Loan Hub

• 0:10
  SPEAKER_01: Okay, we have done this episode multiple times, but we keep getting the same questions from the clients.
• 0:16
  SPEAKER_01: This is about the deposits.
• 0:18
  SPEAKER_01: What do you put as a deposit on a sales and purchase agreement, which is completely different to the deposit for the bank?
• 0:25
  SPEAKER_01: Megan, hello.
• 0:26
  SPEAKER_00: Hello.
• 0:27
  SPEAKER_01: I'm sure we've recorded this multiple times now with you, with Kunch, with James, but people are still confused.
• 0:34
  SPEAKER_00: Yes, because the deposit doesn't have a different name.
• 0:37
  SPEAKER_00: It's still called deposit.
• 0:39
  SPEAKER_00: And yet, to you, a deposit is totally different to a deposit to me.
• 0:44
  SPEAKER_01: But it's still made up of the same money.
• 0:46
  SPEAKER_00: Sometimes it's the same money, but it's less sometimes.
• 0:50
  SPEAKER_00: I get less, you get more.
• 0:52
  SPEAKER_01: Correct.
• 0:52
  SPEAKER_01: Yeah, so it's just mind-blowing.
• 0:54
  SPEAKER_01: So I completely understand why our people are confused.
• 0:57
  SPEAKER_01: So let's dive into what is a deposit on the sales and purchase agreement and how much should people be putting in?
• 1:02
  SPEAKER_00: Yes.
• 1:02
  SPEAKER_00: So I heard a really good episode with you and Kunch the other day where you were talking about the bank deposits and how you used to have to put down 20% and now you can put down 10%.
• 1:12
  SPEAKER_01: Five.
• 1:13
  SPEAKER_00: Oh, sorry, wrong way around.
• 1:14
  SPEAKER_00: 10% and now it's 5%.
• 1:16
  SPEAKER_00: See, it's good that you're here.
• 1:18
  SPEAKER_00: And I was listening in my car.
• 1:20
  SPEAKER_00: I had you on, you know, speaker, and I was listening.
• 1:22
  SPEAKER_00: I was thinking, oh, it's different for us.
• 1:25
  SPEAKER_00: Because we don't need that whole 5% deposit or 10% deposit.
• 1:28
  SPEAKER_01: You don't?
• 1:29
  SPEAKER_00: No.
• 1:30
  SPEAKER_00: On a sale and purchase agreement, it defaults to having a 10% deposit.
• 1:34
  SPEAKER_00: Like if you have an auction agreement, it always got 10% deposit.
• 1:39
  SPEAKER_00: If the if the buyer hasn't requested something different, people assume, oh, it's 10%.
• 1:44
  SPEAKER_00: But actually, in today's market, I was thinking back the last few months, most of my sales has been less than$10,000 deposit, which is amazing.
• 1:54
  SPEAKER_00: Because like if you're selling a house for$600, for example, you'd think they'd pay down$60,000 as a deposit.
• 2:02
  SPEAKER_00: Who has$60,000 these days just sitting in a bank account?
• 2:06
  SPEAKER_01: Well, that was going to be my question, right?
• 2:07
  SPEAKER_01: Because a lot of our first-time buyers, when they buy a house, their deposit comes from KiwiSaver for the banks.
• 2:13
  SPEAKER_01: And to get the Kiwi Saver out in time when they go unconditional to pay down the deposit and not breach any regulations, it takes time.
• 2:23
  SPEAKER_00: Yes.
• 2:24
  SPEAKER_01: So they can put something else as a few.
• 2:27
  SPEAKER_00: You don't even have to do a percentage because your initial offer might be less than the amount that you eventually agree with the homeowner to pay.
• 2:36
  SPEAKER_00: And then if you'd put down like 5%, then that 5% deposit would increase if you offered them like another$10,000 or$20,000, for example.
• 2:44
  SPEAKER_00: And you might not have that sitting in a bank account ready to pay to the non-interest bearing trust account that the deposits get paid into.
• 2:54
  SPEAKER_01: So the way I see it, the deposit, just to demystify for those that are listening, is basically your commitment.
• 3:01
  SPEAKER_01: Yes.
• 3:01
  SPEAKER_01: It's your commitment money.
• 3:03
  SPEAKER_01: I'm going to rephrase it from now on and be like, this is your commitment money.
• 3:06
  SPEAKER_01: The moment you go unconditional, how much money do you have to commit for this purchase?
• 3:11
  SPEAKER_00: Yes, that's right.
• 3:12
  SPEAKER_00: And you might have your Kiwi Saver, you might have been paying heaps into your Kiwi Saver.
• 3:18
  SPEAKER_00: You might have a small savings account, but most people would say, oh, don't put too much in your savings account because it could be in Kiwi Saver earning better interest potentially.
• 3:27
  SPEAKER_00: But people do usually have a small savings account when they're saving up to buy their first home.
• 3:33
  SPEAKER_00: So the last few that we've had has had$7,000 saved up.
• 3:37
  SPEAKER_00: And we put that on the contract,$7,000.
• 3:40
  SPEAKER_00: And then we still negotiate the actual purchase price, but you know it there's that safety of knowing your deposit isn't going to dramatically grow if you pay a little bit more in the purchase price.
• 3:52
  SPEAKER_01: Okay.
• 3:52
  SPEAKER_01: Because historically I remember people would always say, well, deposit is for the agents to get paid.
• 3:57
  SPEAKER_00: Oh yeah.
• 3:58
  SPEAKER_00: I mean, it's like we're not going to get paid out of$7,000.
• 4:02
  SPEAKER_00: But we get paid on the settlement usually.
• 4:05
  SPEAKER_01: Because some agents are quite pushy about the deposit.
• 4:09
  SPEAKER_00: Yeah.
• 4:09
  SPEAKER_00: Is that the best thing for the homeowner though?
• 4:11
  SPEAKER_00: Or is that the best thing for the clients involved?
• 4:14
  SPEAKER_00: Or is that the best thing for the agent?
• 4:16
  SPEAKER_01: And this is where, you know, we go back to our values.
• 4:18
  SPEAKER_00: Yeah.
• 4:19
  SPEAKER_01: And as a human, you know, what do you want?
• 4:21
  SPEAKER_01: Do you want to be a good human and actually provide the best service for your clients and look after them?
• 4:26
  SPEAKER_01: Yeah.
• 4:26
  SPEAKER_01: Or do you want to be that pushy agent that says, no, you must put 10% because this is what it says, and be sneaky about it and not actually give them options that well, you just might not have that much in your savings either.
• 4:37
  SPEAKER_00: Like you either have to put in a clause saying that the deposit will be paid from the Kiwi saver, which takes time, and then the homeowner's sitting there with no deposit paid, wondering if it's going to go through.
• 4:48
  SPEAKER_01: Commitment money.
• 4:49
  SPEAKER_00: Commitment money.
• 4:50
  SPEAKER_00: I'm going to say that as well.
• 4:52
  SPEAKER_00: Um or do you just accept a lower commitment payment and know that that's like it's all done and dusted.
• 5:01
  SPEAKER_01: And it's going to go through.
• 5:02
  SPEAKER_01: Yeah.
• 5:02
  SPEAKER_01: So the way I like to explain to people, look, you put down the deposit, it still forms the full purchase price.
• 5:09
  SPEAKER_01: So if the purchase price is 600, you're only putting 10,000 now.
• 5:12
  SPEAKER_01: You still need to come up with the rest of 590 at the settlement day.
• 5:16
  SPEAKER_01: So you don't have to come up with another 600 on top.
• 5:19
  SPEAKER_00: No, it's not on top.
• 5:20
  SPEAKER_01: Because a lot of people get confused.
• 5:22
  SPEAKER_01: They think that that deposit somehow disappears and not is counted as part of their money, but it does.
• 5:27
  SPEAKER_01: And the other thing that they also need to remember is that sometimes we can actually organize temporary overdrafts for them.
• 5:34
  SPEAKER_01: I had to do that yesterday for a client.
• 5:36
  SPEAKER_01: That was freaking out.
• 5:37
  SPEAKER_01: And I said, look, you still have a couple of days to pay down the deposit.
• 5:40
  SPEAKER_01: It doesn't have to be in that hour that you've gone unconditional.
• 5:43
  SPEAKER_01: You still they usually give you grace in New Zealand.
• 5:46
  SPEAKER_01: We're quite good with that.
• 5:47
  SPEAKER_00: We give especially if you tell the agent what's happening.
• 5:50
  SPEAKER_01: Yeah.
• 5:50
  SPEAKER_00: And that's a really good thing to do.
• 5:52
  SPEAKER_01: Yeah, and that's the thing.
• 5:53
  SPEAKER_01: I always say to my clients, make sure you communicate with the agents and say, Yep, we're sorting it out.
• 5:57
  SPEAKER_01: So the deposit, we've organized them a temporary overdraft, and the bank was okay to do that because the contract was unconditional, they were unconditionally approved, and the temporary overdraft has slightly higher interest rate, but still it just lets them to get the money out now versus later and commits them to that to that pro uh sales and purchase agreement.
• 6:17
  SPEAKER_01: The other thing as well that I usually say to the clients that if the settlement is within two weeks, try to negotiate non-deposit.
• 6:24
  SPEAKER_01: Because to be honest, within two weeks, the vendors will get the full amount.
• 6:28
  SPEAKER_00: That's true.
• 6:29
  SPEAKER_00: Yeah, we don't actually legally have to have a deposit.
• 6:32
  SPEAKER_00: Yeah.
• 6:32
  SPEAKER_00: If the homeowner is okay with that.
• 6:34
  SPEAKER_01: Yeah, so if the homeowner is okay with that, if the settlement is going to happen within two or three weeks, like at the end of the day, it's not the end of the world.
• 6:40
  SPEAKER_01: Everyone can survive.
• 6:42
  SPEAKER_01: It's just the problem is with my clients yesterday, they were putting down the deposit for the vendors because the vendors needed to put down the deposits on another house.
• 6:50
  SPEAKER_01: Yes.
• 6:50
  SPEAKER_01: So there was a bit of a domino effect there.
• 6:52
  SPEAKER_00: Yeah.
• 6:52
  SPEAKER_01: And that's where there was a lot of pressure going on.
• 6:54
  SPEAKER_00: Well, they're asking for early release.
• 6:55
  SPEAKER_01: Yeah, I believe so.
• 6:57
  SPEAKER_00: We had that one with a couple of older clients where one of them was selling to to how do I say to release equity from her home.
• 7:07
  SPEAKER_00: She had a house that was quite valuable and she was retired and she would prefer to have some more money in her actual account.
• 7:16
  SPEAKER_00: So we were selling her house.
• 7:18
  SPEAKER_00: She was buying the house of another one of our clients who was moving overseas and purchasing a house.
• 7:23
  SPEAKER_00: And this first client had a very small amount of savings.
• 7:27
  SPEAKER_00: And she'd just paid for marketing as well with her house sale.
• 7:30
  SPEAKER_00: So she put down a very small, like under$5,000 deposit on the purchase of my of her next property.
• 7:39
  SPEAKER_00: And the that client's lawyer said, Oh, I don't feel comfortable about such a small deposit.
• 7:46
  SPEAKER_00: And we went back to her and we said, Look, this lady just literally doesn't have any other savings and isn't able to access any other funds.
• 7:54
  SPEAKER_00: I should have called you.
• 7:55
  SPEAKER_00: But what the lawyer ended up doing was said, Well, her the first client's house was under offer.
• 8:01
  SPEAKER_00: Could we get early release from her purchaser to make up the difference?
• 8:05
  SPEAKER_00: So, say for example, she put down like$3,000 as her deposit, and then we got the other$7,000 released from the first home buyer that was buying her house.
• 8:16
  SPEAKER_00: And so it was a$10,000 deposit that she ended up paying, but partly from savings and partly from early release.
• 8:23
  SPEAKER_00: So there's there's ways around this if people just have a chat and ask an expert.
• 8:28
  SPEAKER_01: Yeah, and we'll find solutions for them, you know.
• 8:30
  SPEAKER_01: So um, so yeah, definitely, you know, keep me in mind next time because we can organize those temporary overdrafts for clients if they already had a pre-approval with us and we know what's happening.
• 8:39
  SPEAKER_01: There are urgent buttons, panic buttons we can press.
• 8:42
  SPEAKER_00: It's so good to know.
• 8:44
  SPEAKER_01: There you go.
• 8:45
  SPEAKER_01: You know, that's why we do this podcast.
• 8:46
  SPEAKER_01: We both learn something new every time.
• 8:48
  SPEAKER_01: Megan, thank you so, so much.
• 8:50
  SPEAKER_01: I hope it really domestifies for people what is deposit on the sales and purchase agreement and what to do about it.
• 8:56
  SPEAKER_01: And just again, ask questions.
• 8:58
  SPEAKER_00: Yeah, ask lots of questions.
• 9:00
  SPEAKER_00: Nothing is too silly to ask.
• 9:02
  SPEAKER_00: Just ring the agent and say, I don't understand.
• 9:04
  SPEAKER_00: Can you say it again?
• 9:06
  SPEAKER_00: And if they say it and you don't understand, you say say it again, but with different words.
• 9:10
  SPEAKER_01: Yeah, you know, rephrase it, reframe it because often the house purchase process is the stressfulest time of your life.
• 9:19
  SPEAKER_01: You have no idea what you're doing, even if you've already done it before, but that could have been five years ago, and things would have changed by now.
• 9:25
  SPEAKER_01: So, and the sales and purchase agreements, they change all the time as well.
• 9:28
  SPEAKER_01: I mean, what version what version are we up to now?
• 9:31
  SPEAKER_01: Like version 20 or something.
• 9:33
  SPEAKER_00: It's just been a new one released.
• 9:35
  SPEAKER_01: You know, they get changed all the time, and and you just you just don't know sometimes where's the right page, where's the right clothes?
• 9:42
  SPEAKER_01: So ask the agents, ask the lawyers, talk to your mortgage brokers.
• 9:45
  SPEAKER_01: You know, we're here to help you.
• 9:47
  SPEAKER_01: Yeah, we do this day in, day out.
• 9:49
  SPEAKER_00: When you ask us, we do tend to go, oh yeah.
• 9:51
  SPEAKER_00: And then we slow down and we go, okay, this is what it is.
• 9:54
  SPEAKER_00: This is the pros and cons.
• 9:56
  SPEAKER_00: This is what you need to understand, and this is who you can consult for more information.
• 10:00
  SPEAKER_01: Yeah.
• 10:01
  SPEAKER_01: And different people absorb information differently.
• 10:03
  SPEAKER_01: Like I find some people are visual, some people are uh auditory, some people, you know, need things written down for them.
• 10:10
  SPEAKER_01: So don't be afraid to ask what you need that will suit your situation.
• 10:16
  SPEAKER_00: That's right.
• 10:16
  SPEAKER_00: We can dance it out even.
• 10:18
  SPEAKER_01: Did you just say dance it out?
• 10:20
  SPEAKER_00: Yeah, let's sing it out, let's dance it out, let's let's make it accessible and make sure that people understand.
• 10:25
  SPEAKER_00: If you need to sit with us in person, that's cool.
• 10:27
  SPEAKER_00: If you prefer us to message you or, you know, phone call, that's whatever your style, that's cool.
• 10:32
  SPEAKER_01: Beautiful, beautiful.
• 10:33
  SPEAKER_01: Thank you so, so much, Megan.
• 10:34
  SPEAKER_01: Lovely to have you here today.
• 10:36
  SPEAKER_00: Thank you.
• 10:36
  SPEAKER_01: See you.