What Is “Deposit Flicking” – and Why Should Property Buyers Be Careful?
You have just bought a property.
You have transferred tens of thousands of dollars as your deposit.
Where do you think that money is sitting?
Most buyers would probably answer:
"In the real estate agent's trust account."
And that is exactly why the recent industry discussion about a practice being referred to as "deposit flicking" is worth understanding.
What is deposit flicking?
"Deposit flicking" is a term currently being used within the property industry to describe arrangements where a purchaser's property deposit is transferred away from the real estate agent's traditional trust account to a third-party service.
The practice has recently attracted significant attention from lawyers, conveyancers and regulators. It has also become the subject of NSW Supreme Court proceedings.
But the broader issue raises an excellent question for every property buyer:
Do you know exactly where your deposit is going?
A property deposit isn't pocket change
On an $800,000 purchase, a 10% deposit is $80,000.
On a $1 million purchase, it is $100,000.
That is a significant amount of money.
Traditionally, deposits paid in a NSW property transaction are held by the stakeholder –the selling agent or the vendors solicitor or conveyancer – pending settlement, subject to the terms of the contract.
Trust money is subject to regulatory requirements.
So if you are being asked to transfer your deposit somewhere different, don't just assume it is standard because you've been sent payment instructions.
Ask questions before transferring the money. Call your property lawyer or conveyancer FIRST!
Before transferring a property deposit, make sure you understand:
who you are paying;
whether the account is a trust account;
who will hold the money;
what authority allows the money to be transferred elsewhere;
when the money can be released; and
what protections apply to your money while it is being held.
If something differs from what your solicitor or conveyancer has told you, stop and check before transferring the funds.
And please verify bank details
Property transactions are also an attractive target for cyber fraud because of the large amounts of money involved.
Never rely solely on an email containing changed bank details.
If you receive unexpected payment instructions, verify them independently using contact details you already know to be genuine.
One phone call can be considerably cheaper than transferring your deposit to the wrong account.
Don't be afraid to ask where your money is going
There is a lot happening when you buy a property.
Finance.
Inspections.
Contracts.
Insurance.
Settlement.
Moving.
It is easy to treat payment of the deposit as just another item on the list.
Don't.
It's your money, and you are entitled to understand where it is being paid and how it will be held.
At Neilson + Co Legal, we guide our clients through the conveyancing process from contract review through to settlement – including explaining what needs to be paid, when it needs to be paid and where it needs to go.