Answering the most common questions about real estate deposits!

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Today we are here to answer the 4 most important questions about real estate deposits. There are key things to know if you’re a buyer, as well as key things for sellers to know. Without further ado, here they are:

1. How much does my deposit need to be?

In Toronto, 5% is a typical deposit, but sometimes you can get away with 4%. If you are a seller, you want the highest deposit possible for security against the buyer possibly changing their mind about buying. 

2. When does the deposit need to be provided to the seller?

In the standard agreement of purchase and sale, the fine print states that the buyer has 24 hours upon acceptance of an offer to provide the deposit. If you are a buyer competing with other offers, however, it’s smart to have certified funds available to give to the seller with your offer. This way the seller won’t have to worry about a buyer who might not show up the next day with the certified funds. Sometimes a seller will even take the 2nd highest offer if that buyer has certified funds when the highest offer only has a regular cheque that still needs to be cashed, or the seller has to take a risk on the buyer to show up the next day with certified funds.

3. Can a buyer get their deposit back before a sale goes firm?

Yes they can. If a buyer purchases a property based on financing or a home inspection for example, and is not satisfied with either, the buyer can back out of the deal and get their deposit back with no penalty. This leads to the final and most common question we hear.

4. If a sale is firm, can the buyer change their mind and get the deposit back?

The answer in most cases is no. If the buyer did end up not wanting to close on the property, not only would they most likely lose the deposit, but the seller could also sue for further damages. Some circumstances will allow a buyer to back out and get their deposit back, such as in cases where the seller or seller's agent had made misrepresentations about a property or not disclosed a critical piece of information that needed to be disclosed.

If you’re planning on selling over the next few months, properties are selling very well right now in August, and we expect that to continue into the fall. It is still a seller's market for most neighbourhoods in the Toronto area. If you have any questions, feel free to give us a call. We would love to speak with you anytime.