Real Estate Education Friday – Deposits

Today we are shedding some light on the deposit for a Real Estate Transaction.

When purchasing a property here in Ontario, after an agreement between both the buyer and seller have been reached. A deposit is needed to be made by the buyer in order to firm up or bind the agreement. An agreement without a deposit is worthless. 

Where and how much of a deposit required varies upon where the sale takes place. Here in Toronto, the deposit amount is 5% of the total purchase price and it is due to the listing brokerage within 24 hours of a successful agreement made. This amount needs to be in some form of guaranteed funds, idle money order, bank draft, wire transfer or certified cheque. Once it is in the trust account the agreement is now binding until one of two things occur. 

1. If the agreement was a conditional agreement and the buyer is not happy with the conditions set forth, he can cancel the agreement and receive the deposit back in full, without deduction. Both parties move on. 

2. The deal was was firm or conditions were met and now the deal is also firm. The deposit forms part of the agreement and is applied against the buyer’s down payment at closing.

3. In some cases, although not common, a buyer has firmed up the deal but for some reason is not able to close on closing date. At this point, if there is no way a buyer can purchase the property, the seller DOES NOT receive the deposit. The deposit stays in the trust account until the governing body sees fit on what to do with it. The buyer, however also does not get the money back…there will likely be lawsuits and retribution to pay the seller, lawyers, representatives etc. This money is tied up and can take years for either party to access it. 

In the mean time, the home most likely will have been placed back on the market📈 for re-sale.