Why buyer defaults have surged 10x 🤯 Jared Zak

Business-Focused Summary

Market Conditions and Transaction Risk

Jared Zak said transaction volumes were down about 20% in New South Wales. Queensland and Victoria were also slowing, although his firm had gained market share in Queensland.

Buyer defaults had risen roughly tenfold—from about 1 in 1,000 transactions during the prior bull market to around 1 in 100 after the market turned. Zak said his firm handles 8,000–9,000 transactions a year and had seen about 10 defaults in the previous 12 months, with more concentrated in the most recent six months.

A common cause was buyers purchasing before selling their existing home. They expected to sell within a three-month settlement period, but the sale took longer or achieved less than expected, leaving a funding gap at settlement.

Zak described lower transaction volume—not just lower prices—as a major industry challenge, with flow-on effects for buyers’ agents, conveyancers, lawyers, designers and photographers.

Contract and Transaction-Risk Playbook

Verify the buyer and the deal, not just the price. Agents should assess whether a buyer can complete the transaction and whether its conditions are clear.

Deposits and Default Exposure

• A defaulting buyer can lose the deposit already paid.
• If a reduced deposit is accepted—for example, 5% instead of 10%—the contract may need an express clause requiring the buyer to pay the balance in the event of default. Zak cautioned that a reduced deposit does not automatically make the buyer liable for the unpaid portion.
• A seller may also seek damages if a resale produces a loss greater than the forfeited deposit. Such claims can involve lengthy litigation.
• Zak recommended that sellers’ agents consider seeking a 10% deposit, where appropriate, to improve seller protection.

Conditional Clauses and Chained Transactions

A subject-to-sale clause makes the buyer’s purchase conditional on selling their existing property. It reduces the buyer’s risk of being unable to settle, but leaves the seller waiting on an uncertain sale.

A seller’s sunset or expiry clause sets a specific deadline for the buyer to satisfy conditions, such as selling their home, obtaining finance or completing inspections. If the deadline passes, the seller may be able to consider another buyer—potentially one offering more certainty rather than simply a higher price.

Zak said subject-to-sale clauses had reportedly grown from about 5% to nearly 90% of contracts in Queensland over six months. He noted they were less common in New South Wales and that contract terms vary by state and negotiation.

If one purchase depends on a sale that itself depends on another sale, delays can cascade through the chain. Zak said he dislikes the operational complexity but acknowledged that these clauses may help deals proceed in a cautious market.

A Newcastle agent, Luke Wilson, explored an auction contract that would give the successful bidder a five- or ten-day conditional period. Zak said parties can negotiate bespoke terms, but described the example as unconventional; its outcome was not confirmed.

Deposit Handling and Trust

Zak used “deposit flipping” to describe agents transferring a buyer’s deposit to a third party. He said the practice had grown in the prior year, was not clearly regulated, and raised questions about legal responsibility and insurance if money went missing or was improperly released.

His central recommendation was to protect the buyer’s deposit and preserve transparency, accountability and the safeguards associated with established trust-account arrangements. He called for regulatory clarity rather than assuming the practice is safe or lawful.

Product and Operational Example: AI Contract Review

Zak described a free AI-based contract-summary tool developed by Dott & Crossitt and trained using about 10,000 documents.

Workflow: The user uploads a property contract and receives an emailed summary within minutes, including a green, amber or red risk rating and an explanation.

The tool was described as available for contracts in New South Wales, Queensland, Victoria and South Australia, but not yet in Western Australia or Tasmania. Potential users include buyers who want an initial review before deciding whether to pay for a full legal analysis, and agents seeking to add value through preliminary due diligence.

Zak stressed that the AI tool is not a substitute for legal advice. The firm was testing demand and had not committed to keeping it free permanently.

Regulation, Productivity and Execution

The speakers discussed Victoria’s auction-rule changes expected from October 1, particularly issues involving reserve prices, withdrawing a property from bidding and post-auction expressions of interest. They emphasized that the details were evolving and advised viewers to verify current requirements rather than rely on the discussion as legal guidance.

Tom argued that compliance work reduces the time agents can spend selling, managing clients and running campaigns. He gave the example of four hours of compliance consuming half of an eight-hour productive day.

Both speakers criticized the workload and cost associated with complex AML/CTF requirements, particularly for smaller agencies that lack dedicated infrastructure.

Actionable takeaway: In a low-volume market, reduce execution risk with clear contract conditions, realistic buyer checks, protected deposits and efficient review processes—while keeping up with jurisdiction-specific legal and compliance changes.

Metrics and Figures Mentioned

Measure Figure New South Wales transaction volume Down about 20% Buyer default rate Approximately 1 in 1,000 previously versus 1 in 100 currently—about a 10× increase Firm transaction volume 8,000–9,000 per year Defaults reported by the firm Around 10 in the prior 12 months, with an increase in the most recent six months Deposit examples 5% reduced deposit versus a commonly used 10% deposit Queensland subject-to-sale clauses Approximately 5% to nearly 90% of contracts over six months, according to Zak AI tool training data About 10,000 documents AI contract-summary turnaround A few minutes

Presenters and sources: Tom Panos, host of Real Estate Gym / Tom Panos Real Estate Training; Jared Zak, Principal Solicitor and founder of Dott & Crossitt. The discussion also refers to Newcastle agent Luke Wilson and the Dott & Crossitt AI contract-summary tool.