MONEY DEPOSITS WHEN PURCHASING A HOME

When purchasing a property you are typically required to provide a money deposit to show the seller that you are serious about purchasing their property.  While a deposit is not required to create a binding contract, it is viewed as a good faith gesture.

A typical deposit for a purchase is around 5% to 10% of the purchase price but any amount can be negotiated. Buyers and sellers can also negotiate any terms into a real restate purchase contract including when a deposit is due. In most cases a deposit will either be given to the seller when an offer is accepted, or when subjects are removed by the buyer.

The terms can also include how the deposit is issued, typically the deposit is issued be certified cheque, bank draft or wire transfer. It is always advisable to use a form of payment that can be replaced should it be lost or stolen before it can be deposited. Also, when purchasing a home make sure you have your deposit ready to go and not stuck in term which can take up to 3-5 business days to withdraw. Most deposit terms will require the deposit to be received 24 hours after subject removal.

Just like the timing of a deposit, who holds the deposit can be negotiated between the buyer and seller. In most cases, the brokerage (agency) representing the buyer will hold the buyer’s deposit until the deal completes.

Regardless of who is holding a deposit, it is always best practice to ensure the deposit is held in trust and you should request a receipt from the holder of the deposit. The trust account protects the funds should there be a dispute down the road and will prevent either party from absconding with the money.

Once your deal completes the deposit becomes part of your down payment total you agreed to with the lender. The lending institution will then pay the remainder of the funds owed to the seller.