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By Jason Lim, REN 84424 · IQI Realty · Checked on 15 November 2026
An earnest deposit (wang cengkeram) is the money a buyer pays with a signed letter of offer on a Malaysian subsale home, commonly 2–3% of the price. No law fixes it: the letter of offer decides who holds it and when it is refunded or forfeited. It later counts towards the 10% paid at SPA signing.
This guide is for JB buyers from Malaysia, Singapore, Indonesia, India, China and MM2H. Sellers: see handling offers as a seller.
Quick answer
- Usual amount: 2–3% of the price, a market custom rather than a legal rule (PEPS, the private-sector valuers’ and estate agents’ association, accessed November 2026).
- Paid with: a signed letter of offer (surat tawaran).
- Held by: ideally the registered agency or a lawyer as stakeholder, never a personal account.
- Refunded: when the seller rejects the offer or a written condition fails, such as the loan or state consent.
- Forfeited: usually when the buyer simply changes their mind; the amount must still be reasonable under section 75 of the Contracts Act 1950.
- Next step: the SPA, commonly 14 to 21 days later, when the buyer tops up to 10% of the price.
General information, not legal or financial advice. Ask your own lawyer to read the letter of offer before you sign it or pay.
What is an earnest deposit in a Malaysian subsale?
In a subsale you buy from the current owner, not a developer. Once you agree a price, you sign a short letter of offer (sometimes called an offer to purchase) and pay the earnest deposit with it. It shows you are serious and usually takes the home off the market while the sale and purchase agreement (SPA, perjanjian jual beli) is prepared.
The Board of Valuers, Appraisers, Estate Agents and Property Managers (LPPEH) describes it in its draft standards as an initial payment showing serious interest, which may be forfeitable under the agreement’s terms (exposure draft, 2012). In JB subsales it normally counts towards the 10% paid at SPA signing.
How much is the earnest deposit?
The common range is 2–3% of the purchase price (PEPS, accessed November 2026). Other figures can be agreed, but sellers often counter a much smaller deposit.
| Purchase price | Earnest deposit at 2% | Earnest deposit at 3% | Top-up at SPA (to reach 10%) | Balance on completion (90%) |
|---|---|---|---|---|
| RM500,000 | RM10,000 | RM15,000 | RM40,000 or RM35,000 | RM450,000 |
| RM800,000 | RM16,000 | RM24,000 | RM64,000 or RM56,000 | RM720,000 |
| RM1,200,000 | RM24,000 | RM36,000 | RM96,000 or RM84,000 | RM1,080,000 |
The 90% balance is generally due about three months after the SPA, with a possible one-month extension at an agreed interest rate (The Edge Malaysia, October 2021). Most buyers fund it with a home loan; see my subsale timeline for Johor Bahru for the weeks in between.
Is the earnest deposit required by law?
No statute requires an earnest deposit or sets its size. It is a custom, and the legal effect comes from general contract law. Under the Contracts Act 1950, an offer that is accepted absolutely and without changes becomes an agreement (sections 2 and 7), an offer can be withdrawn until acceptance is complete (section 5), and an offer lapses when its stated time runs out (section 6).
So a signed and accepted letter of offer can bind both sides before any SPA exists (The Edge Malaysia, October 2021). Some letters say “subject to contract”, meaning nobody is bound until the SPA is signed; others are firm promises to proceed. Know which one you are signing.
Who should hold the earnest deposit?
The safest arrangement is a stakeholder: a neutral party who holds the money and releases it only when the agreed event happens. LPPEH’s draft standards treat money held as stakeholder as client’s money, kept in a firm’s account with “client” in its title (LPPEH exposure draft, 2012). In JB this is usually the estate agency or a lawyer.
| Who holds it | What it means for you | What to check |
|---|---|---|
| Registered estate agency, as stakeholder | Released to the seller, or refunded to you, according to the letter of offer | The firm’s registration, a clients’ account in the firm’s name, an official receipt |
| Lawyer, as stakeholder | Common where there is no agent | The firm’s client account and a receipt |
| Seller directly | Common in private sales; harder to recover if a dispute arises | Proof that the seller is the registered owner, a signed receipt |
| An individual “agent” personally | Avoid | Do not pay; ask for the firm’s account instead |
Only registered estate agents, with negotiators (RENs) working under them, may do estate agency work; acting without registration is an offence under sections 22C and 30 of Act 242 (fine up to RM300,000, up to three years’ prison, or both). Check the LPPEH register before any money moves; my guide to checking a REN or estate agent shows how, and property scams in Johor Bahru lists the warning signs.
About to pay an earnest deposit in JB?
Send me the address or project and the asking price. I’ll check recorded sales nearby and go through the offer letter terms and refund conditions with you before you pay anything.
WhatsApp JasonWhen do you get the earnest deposit back, and when do you lose it?
The letter of offer decides. Usual outcomes where it is well drafted:
| What happens | Usual outcome for the earnest deposit |
|---|---|
| The seller rejects the offer, it lapses, or you decline a counter-offer | Refunded in full; a counter-offer is not an acceptance (Contracts Act, section 7) |
| Your loan is refused or approved for less, within the deadline in a written loan condition | Refunded, sometimes less a small agreed sum; check the wording |
| The title search shows a problem (different owner, caveat, restriction you were not told about) | Usually refunded if the letter makes it subject to a clean title |
| State consent is refused for a foreign buyer, where the offer was subject to consent | Refunded as the letter or SPA provides |
| You change your mind or miss the SPA date without a valid reason | Usually forfeited to the seller |
| The seller refuses to sign the SPA after accepting | Refunded; some letters add an equal sum as compensation, and you may have further claims |
Section 66 of the Contracts Act requires money received under an agreement that becomes void to be restored, but there is no automatic refund if your loan fails: you are protected only as far as the condition you signed. For loan problems, see why housing loans are rejected and when the bank valuation is lower than the price.
Can the seller keep the whole earnest deposit?
Usually yes, if the buyer is at fault and the amount is reasonable. In Linggi Plantations v Jagatheesan [1972] 1 MLJ 89, the Privy Council held that a defaulting buyer normally cannot recover a reasonable deposit (Malaya Law Review, 1988).
The Federal Court refined this in Cubic Electronics v Mars Telecommunications [2018] MLJU 1935. It held that deposits fall under section 75 of the Contracts Act, that reasonable compensation can be awarded without proof of actual loss, and that the party in breach must show the sum is unreasonable; it upheld the forfeiture of a RM2 million deposit (University of Malaya Law Review, accessed November 2026). A customary 2–3% earnest deposit is hard to recover if you walk away without a contractual reason.
What should the letter of offer say?
Most deposit disputes come from vague letters. Make sure yours covers:
- The property and the parties: full address, title or strata details, and the seller’s name exactly as on the title search. See title searches.
- Price and deposit: the offer price, the earnest deposit amount, and that it counts towards the 10% at SPA signing.
- Stakeholder: who holds the deposit, in which account, and when it is released.
- Loan condition: the loan amount or margin you need, a deadline, and a full refund if the loan is refused or approved for less.
- Consent condition: for foreign buyers or restricted titles, subject to state consent, with a refund if it is refused.
- SPA date: a date for signing the SPA, commonly 14 to 21 days after acceptance.
- Seller default: what happens if the seller does not proceed, for example a refund plus an equal sum.
- Fixtures and condition: which air-conditioners, water heaters and cabinets stay, any repairs before completion, vacant possession or an existing tenancy. See fixtures and fittings in a subsale.
- Expiry: when the offer lapses if not accepted.
Check before signing, not after: use my subsale viewing questions, compare recorded transaction prices, and follow my guide to making an offer on a JB subsale.
How is an earnest deposit different from a booking fee or the SPA deposit?
A new-launch booking fee is different: it is paid to a developer to reserve a unit, under the developer’s terms and housing development rules. The earnest deposit is the subsale equivalent, paid to or for a private seller. Both normally count towards the price, and the SPA deposit brings the total paid to commonly 10% (PEPS, accessed November 2026; The Edge Malaysia, October 2021).
Neither the letter of offer nor a subsale SPA comes with a statutory cooling-off period, so the time to think is before you pay. See is there a cooling-off period for property in Malaysia?, booking fee refunds for new launches and backing out after signing an SPA.
What should foreign buyers in Johor know about the earnest deposit?
- Check the price floor first. Foreigners can generally buy Johor residential property only from RM1 million, with only limited exceptions (for example, some serviced apartments sold by developers with state approval); no area is exempt as a whole. See the Johor minimum price for foreigners.
- Make the offer subject to state consent. Transfers to foreigners need state approval under section 433B of the National Land Code. Under PTG Johor’s circular in force from 1 July 2025, the residential approval fee is 3% of the price (minimum RM30,000) plus RM2,000 per title, or 2% (minimum RM20,000) between immediate family. See state consent in Johor.
- Stamp duty: a flat 8% on transfers to foreigners from 1 January 2026.
- Expect source-of-funds questions. Lawyers and agencies check where purchase money comes from under the Anti-Money Laundering Act (amended from 1 March 2026); pay from your own account. See source of funds checks.
- MM2H buyers. I coordinate with a MOTAC-licensed MM2H agent and handle the property side; approval is decided by the authorities. See MM2H property support.
Where to buy if this matters to you
- Mount Austin: condos and terraces popular with families.
- Tebrau, Setia Indah and Molek: established landed neighbourhoods.
- JB Sentral and Bukit Chagar: completed condos near the CIQ and the RTS Link station.
- Iskandar Puteri: completed homes in Medini, Puteri Harbour and around EduCity.
Compare them on my JB property map.
More Johor living guides: Making an offer on a JB subsale · Subsale timeline in Johor Bahru · When the seller backs out · Legal fees when buying property
Frequently asked questions
How much is the earnest deposit for a subsale property in Malaysia?
The earnest deposit for a Malaysian subsale is commonly 2–3% of the purchase price, according to the PEPS association (accessed November 2026). No law fixes the amount, so buyer and seller can agree another figure in the letter of offer. It usually counts towards the 10% paid at SPA signing.
Is the earnest deposit refundable in Malaysia?
An earnest deposit is refundable only in the situations the letter of offer sets out, such as the seller rejecting the offer, the loan being refused within a stated deadline, or state consent being refused. If the buyer simply changes their mind, the earnest deposit is usually forfeited to the seller.
Who should hold the earnest deposit in a subsale?
The earnest deposit is best held by a stakeholder: the registered estate agency in its clients’ account or a lawyer, who releases it only as the letter of offer allows. Never pay an earnest deposit into an individual agent’s personal account, and check the agent on the LPPEH register first.
Is a signed letter of offer with an earnest deposit legally binding?
A signed and accepted letter of offer can be binding under the Contracts Act 1950, because an absolute acceptance of an offer forms an agreement. Some letters are marked subject to contract, so neither side is bound until the SPA. Ask a lawyer to read the letter of offer before you sign.
Can the seller keep my whole earnest deposit if I back out?
A seller can usually keep a reasonable earnest deposit if the buyer backs out without a contractual reason. The Federal Court in Cubic Electronics v Mars Telecommunications [2018] held that deposits fall under section 75 of the Contracts Act and that the party in breach must show the sum is unreasonable, so a customary 2–3% is hard to recover.
What is the difference between an earnest deposit and a booking fee?
An earnest deposit is paid to a private seller in a subsale with a letter of offer, commonly 2–3% of the price. A booking fee is paid to a developer to reserve a new-launch unit under the developer’s terms. Both usually count towards the price if the sale proceeds.
Making an offer on a JB subsale?
Tell me the home, your budget and whether you are buying with a loan or from abroad. I will check recorded sales nearby and go through the letter of offer with you (deposit, stakeholder, conditions and refund terms) before you pay. You can also book an appointment for viewings, or a Zoom consultation if you are abroad.
Sources: PEPS (Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector), “What is an earnest deposit and how much should I pay?”, accessed November 2026; LPPEH (BOVAEP), Exposure Draft on Malaysian Estate Agency Standards: definitions and standards 4.2.9–4.2.10, 2012, accessed November 2026; Attorney General’s Chambers, Laws of Malaysia: Contracts Act 1950 (Act 136), sections 2, 5, 6, 7, 66 and 75; Valuers, Appraisers, Estate Agents and Property Managers Act 1981 (Act 242), sections 22C and 30; National Land Code (Act 828), section 433B; Anti-Money Laundering, Anti-Terrorism Financing and Proceeds of Unlawful Activities Act 2001 (Act 613), checked November 2026; Soh Kee Bun, “Deposit or Part Payment?”, (1988) 30 Malaya Law Review 167, on Linggi Plantations Ltd v Jagatheesan [1972] 1 MLJ 89 (PC), accessed November 2026; University of Malaya Law Review, “A stunning restatement of the law”, on Cubic Electronics Sdn Bhd v Mars Telecommunications Sdn Bhd [2018] MLJU 1935 (Federal Court), accessed November 2026; The Edge Malaysia, “Know your stuff: What selling property on the secondary market involves”, October 2021, accessed November 2026; PTG Johor, Pekeliling Bil. 3 Tahun 2025 (fees, including foreign acquisitions), 13 June 2025, in force 1 July 2025; PTG Johor, foreign-interest application checklist, May 2026; New Straits Times, “Foreigners hit Johor property resale wall”, 20 April 2026
Jason Lim, REN 84424, IQI Realty Sdn. Bhd. E (1) 1584/6. General information checked on 15 November 2026, not legal or financial advice. Offer letters and SPAs differ from deal to deal; confirm the terms with your own lawyer before you sign or pay any deposit.