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In Victoria, your house deposit usually goes to the seller's estate agent, who holds it as stakeholder in a regulated trust account until settlement. It does not go straight to the seller. If the seller wants the deposit before settlement, section 27 of the Sale of Land Act 1962 sets conditions, including an unconditional contract, proof that secured debts do not exceed 80% of the sale price, and no release before 28 days after signing.
That should be reassuring, but it is still a big moment. When you have just bought in Brunswick, Glen Waverley or Footscray and the agent is asking for the balance of the deposit, you deserve to know where the money sits, who controls it, and what happens if something goes wrong.
Where does your deposit go when you buy a house in Victoria?
Your deposit normally goes into the selling agent's trust account. If there is no agent, or if the contract says so, it may instead be held by a conveyancer or legal practitioner.
A trust account is not the agent's everyday business account. It is a separate account used for client money, including sales deposits. The agent's rent, wages, marketing costs and commission sit elsewhere. That separation matters because your deposit is not the agent's money and it is not the seller's money yet.
At settlement, the deposit is usually released as part of the purchase price. If you paid a 10% deposit on a $900,000 townhouse, that $90,000 counts towards the final amount due. You do not pay it twice. Your lender and conveyancer factor it into the settlement figures.
What does stakeholder mean in a property purchase?
A stakeholder holds the deposit for both the buyer and the seller. The person holding the money is not meant to favour the seller just because the seller appointed the agent.
That is why the agent cannot simply pass the deposit to the seller after a phone call. The stakeholder must hold the funds until the contract and the law allow release. Most of the time, that is settlement, when title transfers and the keys are handed over.
Think of the stakeholder as the person holding the match ball before the final whistle. They do not get to decide the result. They hold the money safely while both sides work through the contract.
If the sale completes, the deposit becomes part of the price. If the contract ends in a way that gives you a right to your deposit back, the stakeholder should not release it to the seller.
Is a real estate agent's trust account safe?
A Victorian estate agent trust account is built to keep client money separate, traceable and checked. That is why buyers should be wary of anyone who asks for deposit money outside the proper trust process.
The safeguards include:
- Separation of funds. Sales deposits must be held in a trust account, not the agent's general business account.
- Inspection powers. Consumer Affairs Victoria can inspect trust account records.
- Annual audits. Estate agents must have trust accounts audited each year for the 1 July to 30 June period.
- Approved auditors. The audit must be carried out by an approved auditor, such as a practising public accountant who meets the required professional membership rules.
- Lodgement rules. The audit report must be lodged through myCAV within 10 business days after the agent receives it.
We've seen buyers get nervous when the deposit is requested by electronic transfer, especially after a fast auction campaign. That concern is fair. The practical answer is not to avoid trust accounts, but to check the details carefully and make sure you are paying the correct stakeholder account.
You should also take basic payment safety steps. Confirm account details using a trusted phone number, not only by email. Be alert to changed bank details close to settlement. Our guide to protecting your deposit from settlement scamsgoes into those payment checks in more detail.
Do you have to pay a 10% deposit in Victoria?
No. There is no Victorian law that fixes the deposit at 10% of the purchase price. Ten per cent is a common market practice, not a legal rule.
A seller can ask for a different amount, and you can negotiate. Some buyers ask for a 5% deposit, especially when cash is tight because they are relying on loan approval, sale proceeds, family assistance or savings that are split across accounts. A seller may agree, reject it or ask for other comfort in return.
A vendor may also ask for a deposit above 10%, particularly in a competitive sale or where they want stronger evidence that the buyer is committed. Before you agree, check whether the amount is workable for you and whether the contract deals with payment timing clearly.
For auction buyers, this needs attention before auction day. Once the hammer falls, you usually do not get a calm half-hour to renegotiate the deposit terms while other buyers, agents and family members hover nearby.
Can the seller get your deposit before settlement?
The seller can only get the deposit before settlement if the legal requirements for early release are met. In Victoria, this is usually handled through section 27 of the Sale of Land Act 1962.
An early release of the deposit is not automatic. The contract must be unconditional. The buyer must be satisfied with the seller's proof of debts, and any secured debts must not exceed 80% of the sale price. The deposit also cannot be released until at least 28 days after the contract was signed.
A seller might ask for early release because they need cash for their own next purchase, moving costs, bridging finance or a deposit on another property. That does not mean you have to agree without checking.
The issue for buyers is risk. Once the deposit leaves trust and goes to the seller, it is no longer sitting in the stakeholder account as a simple settlement credit. If the seller later defaults, getting money back may be slower and messier. That is why the risks of agreeing to an early release should be reviewed before you sign anything.
What happens to your deposit if the sale falls through?
If the contract ends because a valid condition is not met, your deposit is usually refundable. If you default when you were legally bound to complete, the seller may be entitled to keep it.
The difference depends on the contract. A finance condition, building and pest condition, special condition or cooling-off right can change the answer. For example, if your contract is properly subject to finance and your finance is refused within the required time, you may have a path to end the contract and recover the deposit. If you simply change your mind after an unconditional auction purchase, the position is very different.
Before you rely on your cooling-off rights, check whether they actually apply. Victorian cooling-off rules do not work the same way for every purchase, and auction purchases are treated differently from many private sales.
The safest approach is to have the contract reviewed before signing, not after your deposit has already been transferred.
What if you buy privately with no estate agent?
If there is no estate agent, be careful about where the deposit is paid. A private seller should not simply keep your deposit in their own everyday bank account.
When an agent is not managing the sale, the buyer may pay the deposit directly to the seller. The seller must then give it to their legal practitioner or conveyancer, or place it in a special purpose account at an authorised Victorian deposit-taking provider. That account must be in both the buyer's and seller's names.
This is a point where a quick conveyancing check can prevent a painful mistake. If a private seller asks you to transfer a deposit to a personal account with no trust arrangement, pause before paying. Ask who will hold the funds, in what capacity, and where that is written in the contract.
What happens if deposit money is stolen or misused?
Victoria has a compensation scheme for losses caused by misuse or misappropriation of trust money by a licensed estate agent, conveyancer or their representative. It is not something most buyers ever need, but it is part of the safety net.
Consumer Affairs Victoria refers to this type of conduct as defalcation. It can include theft, embezzlement, fraudulent misappropriation or failing to account for money. If you suffer monetary loss because of that conduct, you may be able to claim from the Victorian Property Fund.
A claim is not the same as complaining that an agent was rude, slow or gave poor service. It is aimed at monetary loss caused by misuse of trust money or property. If a claim is refused, there may be a right to apply to VCAT within three months of the decision.
The better path is still prevention: correct account details, proper stakeholder wording, a reviewed contract and no rushed transfers to private accounts.
How can a conveyancer protect your deposit?
A conveyancer checks the deposit clause before you are locked into the deal. That includes who holds the money, how much is payable, when it must be paid, and whether the seller has any early-release rights.
In our practice, deposit issues often come up when a buyer has won at auction and is trying to arrange a transfer limit increase from the bank, or when a private sale contract has vague wording about who receives the money. These are not dramatic problems when spotted early. They become stressful when everyone notices them after signing.
At Pearson Chambers Conveyancing, we check whether the deposit is going to a proper stakeholder, whether the payment timing matches your real banking limits, and whether section 27 wording could put pressure on you before settlement. We also look for signs of payment scam risk, especially where account details arrive by email.
Frequently asked questions
Who holds the deposit when buying a house in Victoria?
The seller's estate agent usually holds the deposit in a trust account until settlement. The agent may also transfer it to the seller's conveyancer or legal practitioner to hold. The holder acts as stakeholder for both buyer and seller.
Is my house deposit safe in a real estate agent's trust account?
Yes, a properly operated trust account is designed to keep sales deposit money separate from the agent's business funds. Victorian estate agent trust accounts are subject to inspection, audit and penalty rules. Buyers should still verify account details before transferring money.
Can the seller spend my deposit before settlement?
No, not freely. The deposit usually stays in trust until settlement unless the section 27 early-release process is satisfied. That process includes an unconditional contract, proof of debts, the 80% debt threshold and at least 28 days from contract signing before release.
Do I have to pay a 10% deposit?
No. There is no Victorian law that requires a 10% deposit on a house purchase. Ten per cent is common practice, but buyers can try to negotiate a smaller deposit and should have the contract checked before signing.
What happens to the deposit if the sale falls through?
If a valid contract condition is not met and you are entitled to end the contract, the deposit is usually refundable. If you default on a contract you were bound to complete, the seller may be able to keep the deposit and may have further rights. The exact answer depends on the contract and the reason the sale fell through.
Where does the deposit go when I buy a house privately with no agent?
In a private sale with no agent, the seller must pass the deposit to their legal practitioner or conveyancer, or place it in a special purpose account at an authorised Victorian deposit-taking provider. The special purpose account must be in both the buyer's and seller's names. Do not pay into a private seller's everyday account without getting conveyancing guidance first.
About the Pearson Chambers Conveyancing team
Pearson Chambers Conveyancing is a Melbourne-focused conveyancing firm helping first home buyers, sellers and property owners work through Victorian contracts every day. Our team reviews contracts of sale and Section 32 statements with a close eye on practical risks, including deposit clauses, section 27 requests and stakeholder arrangements. Questions about who holds the deposit are part of the detail we deal with day to day.
Sources we consulted
- Property deposits for sellers, Consumer Affairs Victoria
- What is an estate agent trust account, Consumer Affairs Victoria
- Auditing estate agents trust accounts, Consumer Affairs Victoria
- Compensation claims for property, Consumer Affairs Victoria
- Sale of Land Act 1962, legislation.vic.gov.au
- Estate Agents Act 1980, legislation.vic.gov.au
Talk to us before you transfer the deposit
Unsure who should hold your deposit, or whether the contract wording protects you properly? Pearson Chambers Conveyancing offers a complimentary Section 32 and contract review, so you can understand the deposit terms before you sign or transfer funds.
Email contact@pearsonchambers.com.au.
General information only, current as at the date of publication. Victorian conveyancing rules and legislation change frequently. Please contact the Pearson Chambers Conveyancing team for advice on your specific contract.