April 19, 2023 | Buying
Everything You Need To Know About Real Estate Deposits In Ontario
Buying a home is an exciting milestone in anyone’s life. As a seasoned real estate team, we’ve had the pleasure of guiding many clients through this process. One aspect that frequently comes up for discussion is the deposit. So, we’re going to walk you through the importance of the deposit, the consequences of late payments, and what happens to your deposit at various stages of the transaction.
What is a Deposit?
A deposit serves as a good-faith gesture from the buyer to the seller, demonstrating the buyer’s commitment to the purchase. It is usually paid within 24 hours of the acceptance of the offer and forms a part of the down payment. The deposit amount varies, but it typically ranges between 5-10% of the purchase price.
When is the Deposit Due?
Timing is crucial when it comes to the deposit. Generally, in Ontario, the deposit is due within 24 hours of the acceptance of your offer. Be prepared to act promptly and ensure that you have the necessary funds available. In some cases, you might be able to negotiate a longer deposit period, but it’s essential to discuss this with your real estate broker to avoid any misunderstandings.
What If the Deposit is Late?
A late deposit can have serious consequences for the buyer. It may result in a breach of the purchase agreement, which can lead to:
a. The seller being entitled to terminate the agreement.
b. The seller potentially keeping the deposit.
c. The buyer being held responsible for any damages incurred by the seller.
To avoid these unfavorable outcomes, it’s crucial to ensure that your deposit is paid promptly and in accordance with the terms of the agreement.
What Happens to My Deposit Upon Closing?
Upon closing, the deposit is applied towards the purchase price of the property. It will be deducted from the total amount that you, as the buyer, owe to the seller. The remaining balance is usually paid by way of mortgage financing or other pre-arranged sources.
For example, if you’ve made a deposit of $90,000 on a $1,000,000 home, your outstanding balance on closing will be $910,000.
What If I Don’t Waive One of the Conditions?
In a real estate transaction, conditions are specific terms that must be satisfied before the sale becomes firm and binding. Common conditions include home inspection, financing, and sale of the buyer’s current property.
If you decide not to waive one of the conditions, the following may happen:
a. The deal becomes null and void: If you choose not to waive a condition by the specified deadline, the agreement will be terminated. Your deposit will be returned to you without any deductions or penalties.
b. Extensions: In some cases, both parties may agree to extend the deadline for satisfying a condition. This allows the buyer additional time to work on meeting the condition. It’s important to discuss any extensions with your real estate broker and the seller.
What Happens if the Deal Falls Through?
When you provide a deposit, it’s important to understand that the money is held in trust by the seller’s brokerage. If the deal doesn’t go through, the deposit is typically refunded to the buyer, provided that the conditions outlined in the Agreement of Purchase and Sale have been met.
However, if the buyer fails to meet their obligations or backs out of the deal without a valid reason, the deposit may be forfeited to the seller. It’s essential to work closely with your real estate broker and legal counsel to ensure that you understand the terms and conditions of your offer and protect your interests.
The deposit is a vital aspect of the home-buying process and, when handled correctly, can help secure your dream home. Understanding the purpose, amount, and timing of a deposit is crucial to navigating the real estate market with confidence.
Don’t forget, we’re here to guide you through every step of the journey and ensure that your experience is seamless and stress-free. If you have any questions about deposits or any other aspect of the home-buying process, don’t hesitate to contact us!
Get The Newsletter
Join our mailing list to get updates from our experts about the Toronto market, the latest listings, and our industry insights.
