Part of buying a house is making a deposit on the purchase of the home. Before you take this step, you’ll want to make sure you know what it means and the implications of paying the money. Once you understand the rules involved, you will feel more comfortable about paying the deposit.
Facts About Paying the Real Estate Deposit
- When the Deposit Must be Paid
Ontario homebuyers have two choices about when to pay the deposit: they can make their payment with their offer to purchase a property, or they can pay it within 24 hours after the offer is accepted. Most buyers prefer to wait to see whether their offer will be accepted before they pay any money. If there are multiple offers on a property, it may be to your advantage to make the deposit right away as a show of good faith to the seller.
- Amount of the Deposit
In Toronto, the deposit can be up to five percent of the selling price. In other parts of the province, a deposit may only a few hundred dollars. Your real estate agent can advise about what is an appropriate amount.
- Refusing to Pay the Deposit Does Not Make the Offer Void
You can’t change your mind about offering to buy a home and then refuse to pay the deposit, thinking that will nullify your deal. The seller can go ahead and get other offers but if the property ends up selling for less than *your* offer, you could be sued for the difference, plus legal fees.
- Deposit Goes to the Seller’s Real Estate Agent, Not the Seller
The deposit is held by the real estate brokerage in trust until the sale closes. If the seller were to disappear with the deposit or go bankrupt, the buyer is not protected. This way, the funds are protected by insurance. Even if the real estate brokerage were to go under, the buyer can still be reimbursed for the funds.
- Buyer Does Not Have the Right to Get the Deposit Back if Unhappy with Home Inspection
Since many offers to purchase are conditional on a satisfactory home inspection but the deposit is not refundable, it makes sense to have two deposits in the document. Make a very small one when the offer is accepted ($1.00) and a full deposit when a satisfactory home inspection has been completed so that you are covered in case the home inspection reveals an issue that would make you walk away from the deal.