Handling deposits and payments for vacation rental bookings

    We receive questions about security deposits all the time from vacation rental owners of all experience levels.  There seems to be some general confusion on how much to charge, when to charge, when to refund, and when to withhold damages. First of all, let's go over some basic definitions.

    Deposits Defined

    When deciding which fees and deposits to charge your renters, it can get pretty confusing, especially if you're unclear about what you're charging for. In general, a deposit is an amount of money that is either refundable or applied toward the rental amount.

    Reservation Deposit: A certain amount of money collected upon booking that validates the rental contract. The reservation deposit can convert automatically into a security deposit.

    Security Deposit: A certain amount of money that the owner holds until after the renters have left the property in case the property has incurred any damages. The security deposit (also called a damage deposit) is usually an amount above and beyond the rental costs and fees. The typical security deposit is $200 or 10% of the rental rate, whichever is greater.

    Pet Deposit: A specified amount of money above and beyond the rental rates. The pet deposit is refunded after the guests' stay if no damage was incurred.


    Property Damage Protection: You may choose to forego deposits all together and purchase PDP. Security Deposit Protection coverage covers accidental damage to your home while the guest is occupying it, and Trip Cancellation coverage to reimburse the cost of the plan to guests who have to cancel their stay.


    What you choose to call your deposit and how much you charge is ultimately up to you. Once you set that policy, you should include the amount in the rates sections of your vacation rental listings, communicate the requirements clearly to your potential guests, and reiterate the deposit guidelines and refund policies in your vacation rental agreement. Your rental agreement should also dictate what is considered a violation and which types of violations can result in partial or full loss of the security deposit.

    When you confirm a booking, you should require your guest to pay the deposit and submit a signed rental agreement as soon as possible. Many owners require a turnaround of 24 hours for the rental agreement, but it is polite to give some leeway if, for example, the booking was made over the weekend and your guest needs a bit more time to have all parties sign the agreement.

    Cancellation Policies

    Your rental agreement should not only spell out your deposit policy but also your cancellation policy. Because you do not run a hotel that will receive walk-in traffic, it is important that you protect yourself from cancellations. We provide several standard cancellation policies for you to choose from.

    Many states have strict laws that prohibit owners or landlords from withholding a security deposit without just cause, which would require you to present receipts for repairs or replacement of damaged items. If, however, you charge a reservation deposit to secure a booking, you may be entitled to keep this money depending on the wording in your contract.

    A word of caution: You could run into a situation where a renter calls you several days after you receive the deposit and cancels due to an emergency. If they request the return of the deposit, you should do so in a prompt manner. Do not initiate the refund until the payment is verified. Although they represent the minority, there are people who will try to defraud you by using a stolen credit card or using stolen bank account information for e-checks.

    Confirming Bookings

    Bookings are automatically confirmed when payment is received via HomeAway Payments. You and the traveler will be notified via email once payment has been made.

    Withholding Deposits

    The point of the security deposit is to protect you in the event that your property incurs damage during a guest's stay. You or your housekeper will play a large role in determining when or how something was broken. Because you or they will be there before and after a guest's stay, you or they should have a pretty good idea of when the damage occurred and who was responsible.

    Deposits made via HomeAway payments are automatically refunded in 7 or 14 days, depending on what you choose. They can be refunded sooner if you choose to go in and manually complete the refund. If there is damage, here is how you withhold funds from the security deposit. Just be sure to comply with laws governing how deposits are held. Some states set a deadline for returning deposits.

    When it comes to identifying damage, keep in mind that you should expect some normal wear and tear, and accept the fact that things will sometimes break. If your guests call to let you know about accidentally damaging or breaking something in your home, you can always tell them to simply go out and replace it. That will really make things easier on everyone.

    However, if your renters didn't adhere to your rental policies and you find damage to your property, it's perfectly acceptable to withhold a portion (or all) of the deposit. If you retain any portion of the deposit, you should keep sound records of the associated costs. You are only allowed to keep actual costs associated with repairing or replacing the damaged item(s), which should also be clearly defined in your rental rules. Don't use deposits as a way to nickel and dime your renters out of more cash or as an opportunity to make extra money for your inconveniences.

    What if your housekeeper will not have time to resolve the problem in time for your next guests' arrival? If the damage to the property will inconvenience your next set of renters, you can compensate them and have it taken out of the original guests' damage deposit, BUT you must have that written and signed in your rental rules.

    So there you have it. It might seem like a lot of information, but accepting and refunding your security deposits should hopefully be a straightforward process. Although it might seem like extra steps, you are protecting you and your renters from the financial burdens of collecting money.


    Remember, being online bookable via HomeAway Payments is now required for every listing.
    *Last Updated April 11, 2018