WHY: The deposit is an amount that is paid as a sign of good faith during the purchasing process.
WHEN: Typically within 24 hours of an accepted offer.
HOW: Most Brokerages allow some or all of the following options:
-Bank draft (typically around $7-10)
-Personal cheque
-E-transfer (confirm your daily transfer limits well beforehand)
-Wire transfer (typically around $17-25)
-Direct bank to bank transfer
-Bill payee (like paying a utility or tax bill through your bank)
AMOUNT:
The higher the deposit amount, the more serious your offer appears to a seller. It typically demonstrates that the money is available & there is less chance that you will walk away (i.e. it is easier to walk away from $2,500 & risk litigation, than to walk away from $50,000).
Most deposits in Ottawa tend to hover between 1-2% of the offer price.
WHO KEEPS THE DEPOSIT:
The deposit is most frequently held by the sellers Brokerage. Real estate trust accounts are very heavily regulated in Ontario, and are comparable to a lawyers trust account.
Depending on the sellers situation, the deposit may sometimes be held by the sellers lawyer. This is more frequently seen with bank repossessions, public guardian or estate sales & such.
IF MY INSPECTION / FINANCING / OTHER CONDITION IS NOT MET, DO I GET MY MONEY BACK?
The key components to reference here are:
-Good faith
-How your contract is written
You cannot back out of a home purchase due to a bad inspection if you never conducted a home inspection during your conditional period... that would be considered bad faith & the seller would have reason to refuse to release the deposit.
However, in the event that a legitimate concern was brought up during the home inspection, or your financing options did not work out / were not satisfactory, your contract should allow you to request a release & termination. Once signed by both the Seller & Buyer, along with both Brokerage managers/Broker of Record, it should take approximately 2 weeks for the release of funds to be processed. The funds are typically released by way of a cheque & can be picked up at the Listing Brokerages office. Your Realtor would notify you when this is ready for pickup.
DEPOSIT VS. DOWNPAYMENT:
Your deposit is given within the first 24 hours of an accepted offer, but your downpayment is due typically 2-4 days before you take possession of your new home.
The deposit amount is subtracted from the total downpayment amount.
Example: You are putting 60k down, and provided a 10k deposit, the total outstanding amount of your downpayment to your lawyer will be 50k.
IS THE DEPOSIT INTEREST BEARING?
It can be.
Each Brokerage policy is different, however, in the event that a Brokerage does collect interest on your deposit, the terms of such will be signed at the same time as signing an offer & will be attached as a Schedule to the offer.
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