Simply put, it is the deposit you put down on the house you want to buy to show the seller that you are indeed serious – earnest about your intentions – in purchasing their home. It is an integral part of the overall home buying process.
However, making a deposit directly to the seller can come back to bite you. It is always dangerous when you make transactions with strangers – no matter the intent – that deal primarily with cash with little to no paper trail. Even cheques are not foolproof here as the person you may make the deposit to might not be the real owner.
In some very real cases, the so-called owner was committing identity fraud. They would then dangle numerous enticements like heavy discounts to get you excited and anxious enough to pony up a lot of cash immediately by making a ton of careless mistakes.
We don’t have to tell you that this will end badly.
These kinds of situations are not exclusive to external parties pretending to be sellers though. Even the agent you hire can sometimes make questionable requests such as asking to assign the cheque to his name instead of his agency.
If you’ve encountered such things or know people who have, then here is what you need to do in the future.
Firstly, the earnest deposit must absolutely be considered as it is a strong indication of your interest and it also helps lock you into the purchase of that home, barring others from moving in. However, never pay in cash to anyone or write a cheque made out to that individual’s name, be it the seller, agent, negotiator, solicitor; no matter how trustworthy they are.
The money should always be made to the estate agent’s registered agency. The agency will hold the deposit as a stakeholder and as proof of your interest. This is legally binding and inoculates you from any shady business dealings. Always ensure that there is a clear and legal paper trail detailing the transaction between you and the party in question.
Before you make any payment though, do your due diligence by checking up on the agency and ensuring that it is licensed and not blacklisted. Do the same for the agent that you are working with and make sure that he too is licensed, not blacklisted and is hired officially by the relevant agency. As The Board of Valuers, Appraisers and Estate Agents Malaysia governs all licensed agents and agencies, visiting their site LPPEH to confirm the veracity of their business are a few simple clicks away.
If you’re concerned over the seller being less than truthful, you can always request to see the paperwork detailing his ownership of the property or you can get the agent and the agency to run a check.
If you feel it is ‘impolite’ or ‘not nice’ to do checks because you’re afraid of implying that you do not trust the person, get over it quickly.
When your money is concerned, there is no such thing as too much security.
Do yourself that favor first before you jump at the first mention of a hefty discount on your dream home and you’ll be able to exert more control during the transaction process.
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