Paying a deposit is one of the first major financial steps when buying property.
For many buyers, transferring tens of thousands of dollars can feel stressful, particularly when they are asked to transfer the money to a trust account after signing the Contract of Sale.
A common question is:
“Is it safe to pay my property deposit into a trust account?”
Generally, a property deposit is paid into a trust account operated by the relevant estate agent, conveyancer or solicitor in accordance with the applicable requirements.
However, buyers should still take care when making a large payment.
This article explains how property deposits are generally handled in Victoria, what a trust account is and what buyers should do before transferring their deposit.
What Is a Property Deposit?
A deposit is an amount of money paid by the purchaser under the Contract of Sale.
For many residential property transactions, the deposit is often expressed as a percentage of the purchase price, although the amount can vary depending on the contract and negotiations.
For example, if a property is purchased for $700,000 and the contract requires a 10% deposit, the deposit would be $70,000.
The deposit is separate from the balance of the purchase price, which is generally paid at settlement.
What Is a Trust Account?
A trust account is an account used to hold money on behalf of another person or party rather than for the immediate use of the business receiving the funds.
Property deposits are generally held in accordance with the applicable trust account requirements until they can be lawfully released or dealt with.
The purpose of holding the deposit in trust is to keep the money separate from the business’s own operating funds.
Who Can Hold the Deposit?
Depending on the transaction and the arrangements in place, the deposit may be held by an estate agent, solicitor or conveyancer in a trust account.
The Contract of Sale and the relevant arrangements should identify where the deposit is to be paid.
If you are unsure about the payment instructions, ask your conveyancer or solicitor before transferring the money.
Does the Seller Receive the Deposit Immediately?
Generally, no.
The deposit is not simply paid directly into the seller’s personal bank account after the contract is signed.
It is generally held in trust until it can be dealt with in accordance with the contract and applicable law.
In some circumstances, a seller may seek early release of the deposit under Section 27.
If you receive a request for early release, make sure you understand the relevant documentation before agreeing.
Why Is the Deposit Held in Trust?
Holding the deposit in trust provides an important safeguard while the transaction is progressing.
The money is kept separate from the operating funds of the person or business holding it.
This is particularly important because settlement has not yet occurred and the transaction may still be subject to contractual rights and obligations.
Is It Safe to Transfer a Large Deposit Online?
Electronic transfer is a normal way of paying a property deposit.
However, buyers should take extra care because property transactions involve large amounts of money and are unfortunately a target for payment fraud and business email compromise.
Before transferring a significant amount, verify the payment details carefully.
How Should I Verify the Trust Account Details?
Never rely solely on bank details contained in an unexpected email.
Before making the transfer, confirm the account details with your conveyancer, solicitor or estate agent using a trusted contact method.
For example, if you receive an email advising that the bank account details have changed, do not simply reply to that email.
Instead, contact the relevant person using a telephone number you already have or another independently verified contact method.
What If I Receive Different Bank Details?
Stop and verify them.
Do not transfer the money until you have confirmed that the new account details are genuine.
Changes to bank account details during a property transaction should always be treated carefully.
If you are uncertain, contact your conveyancer or solicitor directly.
Should I Call Before Paying the Deposit?
For a large property payment, it is sensible to independently verify the payment details before transferring the funds.
A quick telephone confirmation can help prevent a serious mistake.
This is particularly important if:
- The bank account details have changed
- You received new instructions unexpectedly
- The email looks unusual
- The sender’s email address is different
- You are being pressured to transfer money urgently
What If I Accidentally Transfer the Deposit to the Wrong Account?
If you believe you have transferred money to the wrong account or that you have been the victim of payment fraud, act immediately.
Contact your bank straight away and tell them that you believe the payment may be fraudulent.
Also contact your conveyancer, solicitor or estate agent immediately.
The sooner a suspected fraudulent payment is reported, the more opportunity there may be to attempt to recover the funds.
Can the Deposit Be Paid From Someone Else’s Bank Account?
This depends on the circumstances and the requirements of the transaction.
For example, a parent or family member may sometimes assist a purchaser with their deposit.
However, if someone other than the purchaser is providing the funds, you should tell your conveyancer or solicitor before making the payment.
There may be additional identification, source-of-funds or compliance requirements.
Do not assume that the person providing the money can simply transfer it without notifying the professionals handling the transaction.
What About AML Requirements?
Property transactions can involve Anti-Money Laundering and Counter-Terrorism Financing (AML/CTF) requirements.
Depending on the transaction and the circumstances, you may be asked to provide information about the source of funds.
For example, if funds are being provided by another person, your conveyancer may need additional information to understand the source of the money and the parties involved.
Providing the requested information promptly can help avoid delays.
Can I Pay the Deposit in Cash?
You should follow the payment arrangements set out by the relevant parties and professionals handling the transaction.
Large cash payments can create additional compliance and practical issues.
Electronic payment into the nominated trust account is generally more practical and provides a transaction record.
If you are unsure about an alternative payment method, ask your conveyancer before making the payment.
What Happens to the Deposit at Settlement?
At settlement, the deposit forms part of the overall financial arrangements for completing the purchase.
The precise treatment depends on the Contract of Sale and the settlement arrangements.
Your conveyancer will coordinate the financial details required for settlement.
What If the Sale Falls Through?
If a property transaction does not proceed, the deposit may not simply be returned automatically.
The outcome depends on why the contract ended and the terms of the Contract of Sale.
There may be circumstances where the seller is entitled to the deposit or where the buyer is entitled to have it returned.
If a contract is terminated, speak with your conveyancer before assuming what will happen to the deposit.
What If the Seller Wants the Deposit Released Early?
A seller may seek early release of the deposit in certain circumstances.
This is commonly associated with Section 27 of the Sale of Land Act 1962 (Vic).
If you are a buyer and receive a Section 27 statement, you should understand the information provided before deciding whether to consent or object.
You can read more about this in our article What Is Section 27 in Victoria?
Common Mistakes Buyers Should Avoid
Paying Without Verifying the Account
Always confirm the bank details before transferring a large amount.
Trusting an Email Account Change
If payment details suddenly change, independently verify them.
Feeling Pressured to Pay Immediately
Do not allow urgency to prevent you from checking the payment instructions.
Ignoring Source-of-Funds Requests
Provide requested AML/CTF information promptly to avoid unnecessary delays.
Assuming the Deposit Is Automatically Refundable
If the contract ends, the treatment of the deposit depends on the circumstances.
Sending the Deposit to a Personal Bank Account
Follow the official payment instructions and verify where the deposit should be paid.
Frequently Asked Questions
Is it safe to pay a property deposit into a trust account?
Generally, property deposits are held in trust in accordance with the applicable requirements. However, buyers should always independently verify the payment details before transferring funds.
Who holds my property deposit?
Depending on the transaction, the deposit may be held by an estate agent, solicitor or conveyancer in a trust account.
Does the seller get my deposit immediately?
Generally, no. The deposit is usually held in trust until it can be dealt with in accordance with the contract and applicable requirements.
What should I do if the bank details change?
Stop the payment and independently verify the new details with your conveyancer, solicitor or estate agent using a trusted contact method.
Can someone else pay my deposit?
It may be possible, but you should tell your conveyancer or solicitor before the payment is made. Additional identification or source-of-funds information may be required.
What is AML/CTF?
AML/CTF refers to Anti-Money Laundering and Counter-Terrorism Financing requirements. Depending on the transaction, you may need to provide information about your identity and the source of funds.
What happens to my deposit if the purchase does not proceed?
It depends on the circumstances and the Contract of Sale. The deposit may be refundable in some circumstances or may be claimed by the seller in others.
Can the seller ask for my deposit before settlement?
In certain circumstances, a seller may seek early release of the deposit under Section 27. Buyers should understand the relevant documentation before consenting.
How Prox Conveyancing Can Help
At Prox Conveyancing, we understand that transferring a large property deposit can be a stressful part of buying a property.
We help Victorian buyers understand the deposit arrangements under their Contract of Sale and assist with the conveyancing process through to settlement.
If you are unsure about where to pay your deposit, have received changed bank details or have concerns about a payment request, contact us before transferring the funds.
Taking a few minutes to verify payment details can help protect you from a potentially serious financial loss.
About the Author
Meet Sally
Sally Kwok is a Licensed Conveyancer and the Director of Prox Conveyancing. With more than 16 years of experience in the conveyancing industry, she is committed to helping buyers and sellers navigate Victorian property transactions with confidence. Sally is passionate about providing clear communication, practical guidance and personalised service throughout every stage of the conveyancing process.
👉 Learn more about Sally on our About page.
About Prox Conveyancing
Prox Conveyancing is a Victorian conveyancing practice providing professional conveyancing services for residential property transactions across Victoria. We assist buyers, sellers, investors and families with a wide range of conveyancing matters, delivering personalised service, transparent communication and professional support from contract through to settlement.
👉 Learn more about Prox Conveyancing on our About page.
This article provides general information only and is not legal advice. Every property transaction is unique, and the information above may not apply to your particular circumstances. If you require advice about your specific situation, please contact a qualified legal professional or licensed conveyancer.