What is token money ?

Token money is basically a small payment that a buyer hands over to a seller to demonstrate they're genuinely interested in purchasing a property and lock in the deal for a bit. You typically pay it before the sale agreement gets finalised. Also, it can be deducted from what you end up paying for the property. There is no legal minimum or maximum. The buyer and seller just work out what makes sense for them. Below, I have mentioned more about what is token money.

How does Token Money Work When Buying a Property?

Once the buyer and seller shake hands on a price and the main terms, the buyer can put down some token cash to prove they're serious while all the paperwork gets sorted out.

For instance, if an apartment is going for Rs. 50 lakh, and the buyer drops Rs. 1 lakh as token money, that amount can be deducted from the final Rs. 50 lakh bill later on, assuming both sides agree to it.

Before making the payment, the buyer should:

1. Make sure you get a paper receipt for your payment.

2. Include the property specifics and the sale price you settled on.

3. Have them state if that deposit is returnable or not.

4. Document what happens when either of you decides to walk away.

5. Verify the seller's ownership and all the property documents.

Before handing over any cash, make sure both of you get it in writing: whether you can get the token money back if things fall through, when it will be subtracted from the final price, and what happens if either side backs out of the deal.

Hey,

Many a time, landlords and sellers before finalizing a property deal ask for token money. Even car sellers ask for the same when you book a car you like. This amount is usually drastically less than the actual sale price. To make things easy for you, I will explain what is token money in this comment. Keep reading to know more.

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It is notes or coins that are issued by the government yet the face value is more than their intrinsic value. It is the amount of money that is paid by the buyer upon the verbal commitment of the sale. This money acts as a reassurance that the sale will be completed and the remaining amount will be given to the seller.

In case, the buyer does not complete the transaction, the seller is required to forfeit the token money. Until and unless there is a notarized agreement in place that states otherwise. As the cost of producing token money is less than the face value.

Have you ever wondered what type of money is an Indian rupee? It is a mix of both standard money and token money. Economists across the globe have classified money into four different types. These are commercial money, fiduciary money, fiat money, and commodity money.

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This is all from my end on what is token money. I hope the answer cleared all your doubts.