Token Money in Property Deals: What's Safe and What's a Red Flag
By Sambhav K. Pandey
Token money is a standard part of most property transactions, meant to demonstrate serious intent while final documentation is completed. How it's structured, however, is where buyers need to pay close attention.
What Token Money Is Meant to Do
Token money signals genuine buyer commitment and, in practice, takes a property off the market while paperwork proceeds. It is not meant to be a substantial portion of the property's total value.
What a Reasonable Amount Looks Like
Token money is typically a small percentage of the total transaction value — enough to demonstrate seriousness without exposing the buyer to significant risk before full documentation and verification are complete.
Why It Should Always Be Documented in Writing
Every token payment should be documented — specifying what it's for, the conditions under which it's refundable, and what happens if the deal doesn't proceed. A verbal-only token payment offers no protection to either party if a dispute arises later.
Red Flags Around Token Money Requests
Be cautious of pressure to pay a large token amount before title documents have been reviewed, or resistance to putting the token terms in writing. Both are signals to slow down rather than proceed.
About to pay token money on a deal? Get a quick gut-check before you do.
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