Who protects the buyer’s funds when property deals collapse? Every homebuyer should ask before paying a deposit

Property transactions rarely unravel overnight. A deal that starts smoothly with a signed Offer to Purchase (OTP) and a paid deposit can quickly run into delays, disputes or outright collapse. And when that happens, one question matters most: who protects the buyer’s money?

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A string of interest rate cuts over the past few years has seen activity in the local property market increase, along with the volume of deposits being moved. While this is good news for the South African property market, it raises the importance of secure, transparent fund protection when transactions encounter problems.

“People assume property transfers are linear and guaranteed once the Offer is signed,” says Jackie Smith, CEO of Buyers Trust, a safe and secure bank-hosted deposit solution for homebuyers. “But the reality is that many transactions hit obstacles long before registration takes place.”

Smith shares that property transactions can unravel for several reasons. “Bond approvals can stall, compliance certificates can delay transfer, and disputes can arise over fixtures, deadlines or contract terms. In some cases, buyers or sellers may even walk away within the conditions of the agreement,” she explains.

In many cases, the deposit is the first major financial exposure for the buyer. “It’s often between 10% and 20% of the purchase price and is usually paid well before transfer,” Smith continues. “In some cases however, buyers – especially cash buyers – may pay the full purchase price upfront, creating an even greater level of financial exposure. If the deal falls apart, buyers want to know: where is my money, who controls it, and how quickly can it be returned?”

If a property deal turns sour

In most transactions, the deposit is held in a conveyancer’s trust account until transfer takes place. However, when disputes arise between buyers and sellers, the handling and release of those funds can become more complicated.

“Conveyancers may act for the seller in facilitating the transfer process, while simultaneously holding funds in trust on behalf of the purchaser until registration takes place. This can create tension when transactions collapse, and disputes emerge over who is entitled to the deposit.”

Until transfer is completed, Smith explains, the conveyancer holds the purchase price or deposit on behalf of the purchaser. “But if a dispute develops between buyer and seller, the release of those funds can become delayed while legal positions are clarified or contested.”

The result is often frustration, uncertainty and prolonged waiting periods for buyers who believed their deposit was secure.

Three ways to protect funds

Smith shares three practical ways buyers can better protect themselves during the property transfer process.

Know Where Your Deposit is Being Held

Before transferring any funds, buyers should understand who is holding the deposit – conveyancers, estate agents or secure deposit specialists. “It’s important to have visibility and clarity from the start,” says Smith.

She adds that buyers should also be mindful of how many parties are involved in handling the money. “The more touchpoints in the process, the greater the risk of delays or unnecessary exposure. Buyers should prioritise secure and transparent deposit structures that limit unnecessary handling of funds while maintaining clear oversight throughout the transfer process.”

Understand Release Conditions

Disputes often arise around bond approvals, compliance certificates or cancellation clauses.

“Buyers must understand exactly what needs to happen before funds are released,” she says.

“Opting for independent deposit solutions such as Buyers Trust ensures funds are held in a bank-hosted account in the buyer’s name with controlled encrypted release mechanisms in place.”

Stay Alert to Cybercrime

Cybercriminals increasingly target property transactions through phishing emails and fraudulent payment instructions.

“Always verify account details independently and never rely solely on email communication when transferring funds,” Smith advises. “Fraudsters often exploit urgency and confusion during stalled or delayed transactions, making independent verification and secure accounts essential.”

More than a legal process

Smith says deposit protection is ultimately about safeguarding one of the biggest financial moments in a person’s life.

“When a property deal collapses, the financial and emotional impact can be enormous. No buyer should ever be left questioning where their money is, who controls it or whether it can be recovered,” notes Smith.

She adds that solutions such as Buyers Trust are designed to address this gap by ensuring funds are held independently and governed by clear, transparent release conditions.

“In today’s property market, with potential disputes and phishing risks, protecting the deposit is not just an administrative step but a critical financial safeguard when transactions don’t go according to plan.”