When a buyer finalises a property for buying, the next step is to pay a token money to the seller.
What is token money?
Token money is the amount that a buyer pays the seller to show his interest in the property transaction. It is usually 1-5% of the total property value. This transaction is recorded by signing a notarised document that will have some legal holding. The token money is paid to a third-party ESCROW account till the property transaction is complete.
This seals the deal and the buyer can start on the rest of the formalities related to home buying, such as applying for a home loan and preparing registration documents.
However, what if the seller, after taking the token money, cancels the deal and wants to return the amount to the buyer? Here is what the buyer can do.
See also: What to do if seller cheats you with project token money?
Can a seller return the token money?
In case a seller, after taking the token money, decides to cancel the deal, he may return the token money to the buyer along with some penalty (if mentioned in the notarised document). Once the token money is returned, the deal is cancelled.
What if a buyer calls off the deal?
In case a buyer backs out of the deal, basis the agreement on the notarised document, the seller can keep a portion of the amount and return the rest. Sometimes if the deal is cancelled at the last minute or the seller makes it clear that the token money will not be returned in case a deal is cancelled, then the seller may keep the entire amount. In this case, the buyer cannot claim this amount as a tax deduction since it is not an expense but a loss.
RERA regulations on refund of token money
- According to RERA, token money has been capped to a limit.
- In case a buyer wants to withdraw from a deal, the developer
Tips to follow while paying token money
Document: A buyer should insist on the proof of token money paid to the seller. This can be a notarised document that includes details, such as property details, token amount and what happens if either buyer or seller backs out of the deal.
Witness: Give the token money in front of a witness and, if possible, key in their signature in the document so that it can be used as proof in case of untoward incidents.
Avoid paying token money in cash: A better way to document the transaction is to make an online bank transfer or cheque payment. UPI, too, is an accepted form of payment documentation.
Housing.com POV
Buying a house is an expensive proposition. It is always advised that you make an informed decision so that you do not incur losses. In case of property purchase from a developer, be sure that the project is from a reputed developer and is following all rules and regulations. It is a good idea to check the project details on the RERA website before giving the token money.
If you are looking at a resale property, do a thorough check about the property. You can get the documents validated by a lawyer and then proceed to give the token money.
FAQs
Are cash payments recommended for token money?
Cash payments do not give any acknowledgement and can lead to legal issues.
What is the other name of token money?
Token money is referred to as bayana.
Is token money mandatory?
Token money confirms property booking; hence, most sellers insist on it.
What can a buyer do if a seller cancels a deal?
In case a seller cancels a deal after taking the token money, the buyer can file a legal case asking for a refund and compensation.
What is an agreement of token money called?
An agreement of token money is called a bayana agreement or token money agreement that mentions that the buyer is interested in buying the property and will pay the entire sum once the legal documents are prepared.
| Got any questions or point of view on our article? We would love to hear from you. Write to our Editor-in-Chief Jhumur Ghosh at jhumur.ghosh1@housing.com |
