Auction Deposit
Synonyms: Bid Deposit، Entry Amount، Bid Security، Participation Deposit
Last updated: 2026-09-25
Short Definition
An auction deposit is the amount a bidder pays before taking part to prove seriousness; Saudi Arabia's auction regulation calls it the «entry amount», caps it at 5% of the accredited valuation, and requires its type to be stated: earnest, advance on price or refundable security.
Overview
Legal Basis
Article 4(6) of REGA's Real Estate Auctions Regulation (REGA Board decision of 1/12/1444H) requires the brokerage contract to state any entry amount for bidding, not exceeding 5% of the property's appraised value based on an accredited valuer's valuation, and to specify its type (earnest money, advance on price or refundable security). Article 10(2) requires refunds to non-winners within three working days, and Article 6(5) requires the auction request to set out how bidders' funds are held. Article 13 of the Real Estate Brokerage Law, issued by Royal Decree No. (M/130) dated 30/11/1443H, caps earnest money at 5% of the deal value and treats any excess as an advance on price; an amount counts as earnest only if stated in writing, and the broker may not retain earnest as security for its own fee. In judicial sales, Article 49 of the Execution Law provides for arrangements to prove solvency and deduct amounts immediately upon award.
Practical Example
A plot in Abha appraised by an accredited valuer at SAR 1,200,000 goes to auction, so the maximum entry amount is SAR 60,000 (5%). The brokerage contract sets an entry amount of SAR 50,000, designated as an advance on price. Twenty-five bidders take part and pay a total of SAR 1,250,000. The plot is awarded at SAR 1,310,000; the winner's amount is credited against the price and he pays the SAR 1,260,000 balance within the set period. The establishment refunds SAR 1,200,000 to the other 24 bidders within three working days. Had the contract set an entry amount of SAR 90,000 (7.5%), it would have breached the regulation's cap.
Common Mistakes
- ✗Requiring an entry amount above 5% of the appraised value in an auction governed by REGA's regulation — a clear breach of Article 4.
- ✗Not specifying the type of amount (earnest, advance on price or refundable security) — this invites disputes if the winner withdraws or the sale is rescinded.
- ✗Delaying refunds to unsuccessful bidders — the regulation requires refunds within three working days of the auction's end.
- ✗Paying the deposit into an organizer's or agent's personal account — funds must be held under the mechanisms approved in the auction request.
- ✗Assuming a judicial auction deposit is always refundable — in Infath auctions it counts toward the price and is not refunded to a winner who fails to pay.
International Differences
A participation deposit is a common requirement in auctions worldwide. In Turkey, participants in enforcement auctions pay a security (teminat) before bidding, calculated as a percentage of the estimated value. In the UK, the deposit is usually paid on auction day after winning rather than before bidding. In the UAE, auction companies require an upfront deposit refunded to unsuccessful bidders. The Saudi system is distinctive in setting an explicit ceiling (5% of the appraised value), requiring the legal nature of the amount to be specified, and imposing a short refund deadline (three working days) for unsuccessful bidders.
