Do’s & don’ts when paying a stub for a property purchase

While there are no written rules, in India’s real estate market, it is common practice for the seller to forfeit the entire token money if the buyer breaks his verbal promise.

What is token money

What is token money, exactly?

Once a buyer and seller have agreed on a home purchase price, a formal process is started to complete the transaction legally. To demonstrate his genuine intentions, the buyer pays a small portion of the transaction value to the seller.

This payment, in Indian real estate parlance, is commonly known as the token amount’. Regardless of the type of property or deal value, the payment and receipt of this token amount is standard procedure.

This amount is also known as the “advance deposit” or “earnest deposit” because the buyer pays it to demonstrate his genuine interest in the property. The terms ‘binder’ and ‘good faith deposit’ are also used.


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When does the token money get paid?

When the buyer and seller reach a verbal agreement to close the deal, the token money is paid. The paperwork has yet to begin at this time. While there are no written rules, another standard practice in India’s real estate market is that if the buyer breaks his verbal promise, the sellers are entitled to the entire amount. The seller, on the other hand, will be required to return the buyer’s token money if he is unable to complete the transaction for any reason.


What is the amount of money that must be paid as a token amount?

There are no set rules for the amount that the buyer must pay as token money to the seller. This amount varies depending on the circumstances. In the case of buying a property from a developer, a buyer pays a portion of his down payment as token money. So, if a buyer intends to pay Rs 10 lakh out of pocket for a property worth Rs 50 lakh, he would typically give the developer Rs 1 lakh as a token or booking amount.

It’s important to remember that the token number is just a fraction of your down payment, and the two terms should not be confusing. The down payment is the money charged upfront to purchase a home. The token sum is just a small part of it.

What is token money

Is it possible to get the token money back?

Until the parties have made a notarized agreement specifying otherwise, if the buyer fails to conclude the deal for whatever reason, the seller may lose the token money. “The token sum is typically paid by the buyer to the seller immediately after the verbal promise.

Many consumers disregard the documentation at this point because it seems to be an excessive hassle. A notarized paper, on the other hand, would be useful as evidence that the token money has been paid to the vendor, as well as setting out the ground rules for the transaction.

However, since this document lacks legal value due to its lack of registration, it is mainly used as a confirmation of payment rather than a legal document that may be used in court in the event of a lawsuit. And after the buyer pays at least 10% of the deal value & a builder-buyer relationship or an agreement for sale is negotiated by the two parties do the buyer and seller enter into a registered contract.


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What is the safest way to pay token money?

Since there is absolutely no way to guarantee a return of the token money if the property purchase fails, the buyer can keep the token number as low as possible and then agree to a seller after making all required financial arrangements. Paying the token money, for example, maybe dangerous because the home loan application has been accepted by the bank.

Check the seller’s reputation before handing over the token money, and avoid paying in cash. The seller would be unable to prove otherwise if you pay the token money through banking channels.


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Disclaimer: The views of this expressed above are for informational purposes only based on the industry reports & related news stories. does not guarantee the accuracy of this article, completeness, or reliability of the information & shall not be held responsible for any action taken based on the published information.
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