Anyway, it seems like every other day some yahoo is on who backed out of a deal to buy a car, or a jet ski, or rent an apartment, and now he wants his deposit back on the theory that since he didn’t actually purchase the item, he shouldn’t lose any money. But if I am the deposit taker, what incentive do I have to take my item off the market if I have to return it when the sale does not go through? The deposit is intended to hold the item against possible purchasers (good for the depositee) and mitigate my potential losses if the deal tanks (good for me) right?
Under what circumstances does it make sense for the seller to accept a refundable deposit?
A deposit is to keep people from being lazy and acting ADHD and to ensure the product will be there for me to purchase. If I walk into a dealership on impulse and say “I would like to buy the biggest car you have available” then wander off halfway through the paperwork proceedings, that’s a lot of wasted work on the dealership’s part. A deposit would at least keep me there as an incentive to follow through. Now, if I wanted to back out I could talk to the dealership and try to work things out, since no actual sale happened. If I just left, then they would keep the money.
I’m having a hard time following you ( a deposit during negotiations for a new car?) but it sounds like you are talking about a non refundable deposit, not a refundable one. I’m talking about a deposit about which it is understood up front that it will be returned if the buyer backs out.
Sometimes it’s there as an insurance against a late-minute cancellation. If I cancel my wedding venue with two years to go, there’s a reasonable chance the owners will be able to find another event to fill the space. In which case I’d expect to receive the deposit back, especially if no organising has taken place beyond making a note in the booking diary.
The seller hasn’t lost out, so no reason to keep the deposit.
If I cancel with two days to go it’s another story, as there’s not enough notice to find a replacement, so in that case the venue owner would be justified in keeping the deposit to offset their loss of business.
edit: many refundable deposits have a sliding-scale depending on how close to the deadline the contract is cancelled (e.g. 50% if you cancel with a month to go, 70% with two weeks, 100% with a week or less).
Are you saying that there are dealerships that have asked you for money prior to talking to you? I’ve never been asked to part with a dime prior to closing, and if I were asked, we’d not be doing business.
Usually in these cases it comes down to finger point about why the deal fell through. If I’m selling a boat and a take a deposit, that’s for my own protection. However, if it’s revealed after I take the deposit that my boat is made out of paper napkins and isn’t at all seaworthy, the buyer would rightfully expect his deposit back. I might refuse, arguing that he should have noticed it was made out of paper napkins, and we therefore end up in court.
If the buyer just decides he doesn’t want to buy it anymore, I should get to keep his deposit, but if he’s got nothing going on it probably doesn’t hurt him any to take me to small claims court.
ETA: I guess I’ve never heard of a truly “100% refundable” deposit in these cases. Semi-refundable depending on the circumstances, sure. But I don’t know anyone who’s taken a deposit and said “If you change your mind I’ll give it back to you.”
At the very least, it gives the buyer incentive to come back and definitively say “no, I’m not interested” rather than vanishing into thin air, never to be heard of again.
My brother was seriously looking at buying a Porsche Cayenne, and went to the dealership to speak to a salesman. They said they required a substantial deposit and signed paperwork before they would even let him test drive the vehicle (with a saleman - it’s not like he would be taking it out on his own). Needless to say, they didn’t make the sale.
I just reserved a houseboat for a vacation next year, and it required a 20% deposit. For a $150 you could get trip cancellation insurance getting you your deposit (and any other money paid) up until the day of the trip. The amount you can get back otherwise is on a sliding scale with less returned as you get closer to the date.
Since we are going with a couple that has kids, we opted for the cancellation insurance since kids are a natural source of chaos and any one of us could have a random medical issue the week before.
My guess is that these cases you are seeing have to do with either:
the sliding scale is not explained/discussed with the buyer and when they back out, they disagree with the amount kept by the seller or:
The seller changes or discloses something negative about the item and the buyer wants out of the deal so the seller is now trying to keep some of the money, which is possibly justified or unjustified depending on the magnitude of the negative thing.
But the seller is turning down offers the whole time. Not a very good deal for him. Frankly, I don’t want anyone coming back if he’s not buying.
I should have made this more clear. The buyer in each case changes his mind for reasons that have nothing to do with the item that is for sale, other than that he no longer wants it, and there is no sliding scale. Now, the reasons may make sense to him (I lost my job, my Mom died, I’m moving to Saudi Arabia) but none of them have anything to do with the fact that he made a promise to buy, said promise to be backed by the deposit.
I guess I could see this for certain marques of cars in order to prevent joyriding. But… by “signed paperwork” do you mean an actual agreement to purchase??? Crap, no way would that work with me. Without a test drive, I don’t even know if I can fit in the car and be comfortable (real problem). And then, how am I supposed to decide between the Porsche, Audi TT, or Focus RS without driving each of them?
WAG is that refundable deposits are a selling point, if customers know they can back out then they’re more likely to sign the dotted line right then and there. They won’t go home to sleep on in and then get distracted and forget the whole thing. Or just keep looking and find something better. And if you do enough volume then you can eat the cost of the 5-10% or whatever percent who do come back cancel.
Its sorta like stores like Macy’s that take returns for whatever reason. There’s a cost to returns, especially with clothes the item gets moved to the sales rack and can’t be resold for the original price. Plus damage, cost of sales staff labor, etc. But, people like the option to change their mind, they consider it to be good customer service.
Again, just a WAG, IANA retail sales person or anyone else who can claim to give a clever answer.
Your brother must have looked like a bum, and the dealer must have had a bad experience in letting people that looked like bums test drive cars.
While the Porsche Cayenne is an expensive car ($80-90k), I have test driven similarly priced cars without having to put down any deposit or sign any type of contract. The dealer normally wants to see your driver’s license and the salesmen will ride along with you.
@ the OP, when someone is putting down a deposit, it normally comes with a signed agreement/contract. The terms and conditions allowing for its return would be spelled out in that agreement and may differ in each case.
I personally have only encountered a deposit required when renting something, not purchasing.
I understand that. What I don’t understand is what incentive a seller or renter has to make a deposit refundable. The deposit is a hedge against the loss of a sale. If it is refundable there is no point to it.
Think about earnest money that a potential buyer puts down when they make an offer on a house. It is refundable, but it’s purpose is to let the seller know that these are serious buyers that are seriously considering purchasing your house…not just casual interlopers that are looking at houses just for fun.
The earnest money is refundable if the contract does not move forward…in certain cases, a seller can keep earnest money, but normally, if the buyer’s ultimately walk away, they get their earnest money back. So in these cases, probably like the situations you are seeing on court television, the purpose of the deposit is to express the seriousness of the offer to buy.
I think that what people are getting at is that it’s used as a weed out, so salesmen don’t waste time (and money) trying to sell to bums.
People who have the cash for a deposit are more capable of completing a purchase, if only becuase they have proved that they have discretionary cash to put up for deposit.
People who can’t even afford to put up a refundable deposit (an in/out transaction as you have pointed out) are probably not capable of coming up with the total funds to complete the purchase.
E.g. if you’re selling hi-end Porsches, asking for a $10 k refundable deposit upfront (or whatever amount) just weeds out the joyriders, browsers, and wannabes so you can focus on customers that will results in purchases.
I used to work in a women’s clothing shop for a while, and we sold wedding dresses and veils. We kept these items in the store room, so if someone wanted to try on the things, a clerk would have to get them out.
The assistant manager of that store (before I got the position) loved to try on every dress and veil, not because she was planning on getting married soon, but because she loved to play dress up, basically. And some of her friends would come in and they’d have a grand time discussing the various merits of each dress and veil. One day, when she was off, some teeny boppers came in, eating ice cream cones, and wanted to try on veils. I asked them when the wedding was. They said that they weren’t getting married, that they just wanted to try on veils. And I told them the price of the cheapest veil, and demanded to see cash in at least that amount. I wasn’t going to keep the cash, I told them…but if a veil got stained, they were buying it. All of a sudden it wasn’t a game to them.
And that’s my point. Many people love to waste a salesperson’s time, thinking that the salesperson should be glad of the remote possibility of a sale, even if there’s no frigging way that the potential customer is going to buy the item. It does cost the salesperson and possibly the store some resources. If a real customer comes in, and doesn’t get waited on right away, that customer might very well leave (this actually happened several times when the assistant manager was helping someone try on wedding dresses and I was busy with another real customer). In something that’s a bigger ticket item, like a car, dancing attendance on someone who is just looking, or who is thinking about getting something, but isn’t really serious about buying yet, can really cost a salesperson or business.
And I’ve done my share of looking at items, too. I’ll look at prices and quality and features. It’s part of the game. But a lot of people do this when they have no intention of buying, but are just passing the time. I know that one of my SILs likes to look at houses for sale when she’s bored, even though she doesn’t want to move and certainly can’t afford the houses she likes to look at.
This is why open houses are not that great of a selling tool for selling your house. Most of the people that show up are your neighbors that are curious what your house looks like on the inside.