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Deposit in Real Estate


        When you as a Buyer submit an offer to buy a property, the deposit demonstrates your commitment to the Seller to complete the purchase. The deposit is reassurance that you are acting in good faith and have means to purchase a home. It is also important to remember that once the deal closes the deposit will be applied towards the purchase price or down payment.

The deposit is paid by certified cheque or a money order.

When is the deposit due?

In Ontario a deposit is normally due within 24 hours of an (APS) Agreement of Purchase and Sale being accepted.

       Note* that in multiple offer situations it is a good practice to provide a certified deposit at the same time as the offer. This greatly straightens your position againts other bidders and assures the Seller.

How much should the deposit be?

In real estate there's no fixed amount for the deposit that is required. Deposits are typically negotiated betweent Buyer and Seller, but local customs usually indicate what is acceptable. In Toronto and GTA 5 % of purchase price is usually seen as the norm.

The rule of thumb is, the higher the deposit, the more attractive the offer. Sellers may see a larger deposit as an indicator of a stronger commitment from the Buyer.

The risk of offering a deposit that is lower than expected is that is will be rejected by the Seller and make you look as not serious Buyer, or worse a financial risk.

         Note*that if you've started the home searching process, make sure that your deposit is liquid and isn't locked away in an investment or a virtual bank.

Where is the deposit held?

The deposit is normally held by the listing brokerage in the Trust acount. Trust accounts are highly regulated and routinely audited. Deposit money held in trust cannot be used to pay the brokerage's exenses (i.e. rent, salaries etc.)


You deposit is ensured!

There is an insurance policy that protects your deposit up to a maximum of $100,000 per claim. If your deposit exeeds $100,000 you may be asked to provide two deposits to reduce the risk.


What happens to your deposit at closing?

Your depositis applied to the Buye's closing costs and forms a part of the purchase price at closing. For example, if the buyer paid $500,000 for a condo and provided a $25,000 deposit, that amount + any additional downpayment + the mortgage money from your lender will be provided to the Seller less the expenses and adjustments.






NATASHA McCOLL - Condominium.Ca

Sutton Group Realty Systems Brokerage

Independently owned and operated

2186 Bloor Street West, Toronto ON, M6S 1N3

Direct: 647-222-2222

Office: 416-762-4200

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