Written by Mary Carvalho   |   Posted on   |   394 views

When Does a Deposit Need to be Paid?

Typically, when you submit an offer on a home, it is agreed upon that you will pay the deposit within 24 hours after acceptance of your offer by the sellers. However some real estate brokerages instead ask that you submit a deposit herewith your offer—meaning at the same time as the offer is submitted.  

Remember:  even if your offer is conditional, you are still required to pay the deposit. If, for whatever reason your purchase doesn’t firm up (due to your condition of finance or inspection or whatever other conditions you may have included), you will sign a Termination and Mutual Release, and your deposit will be returned to you.

How Can a Deposit on a Home be Paid?

EFT, wire transfer or direct deposit

Some brokerages (like Revel Realty Inc.) prefer that all deposits be paid electronically. For instance buyers can submit payment by Electronic Funds Transfer (EFT), Wire Transfer, or even through direct deposit into the brokerage’s account.

Bank drafts, certified cheques or email transfer

Depending on the amount, other brokerages still accept bank drafts, certified cheques or instalments via email transfer. In cases like this the seller’s real estate brokerage will provide you or your agent with instructions as to what they require.

Never pay a deposit directly to the seller

Pro Tip! Never pay a deposit directly to the seller. The money is better protected when it is in the real estate brokerage’s trust account and is covered by actual legislation. If the deposit were paid directly to the seller, they could take that money and spend it, and the buyer would have little recourse.  

What Happens After I Submit My Deposit?

After you submit your deposit, the seller’s real estate brokerage will provide you with an official receipt. This receipt will let you rest assured that they’ve received the funds. The money will be held  in the trust until the house closes and the money will be applied to the purchase price of your home.

How Much on the Deposit Do I Need to Pay?

Every listing is different so the amount of the deposit you have to pay will vary by each sale. You may see listings that request a $10,000 deposit, and you may see others requesting a $50,000 deposit. This varies from case to case but your REALTOR® should be able to direct you.

Remember, this deposit can be negotiated as part of your offer just like the purchase price can too. But keep in mind the seller will want a large deposit payment while you probably would rather pay a smaller deposit up front and make it easier on your wallet. The amount of the deposit only really comes into play if the house ends up not closing.

What Happens to the Deposit if the House Doesn’t Close?

When a house doesn’t end up closing it doesn’t automatically mean the seller gets to keep the buyer’s deposit payment. That’s often a misconception. Likewise, the buyer doesn’t get their deposit returned immediately if it’s the seller’s fault for the home not closing.

In fact, the deposit will only be released if a Mutual Release is signed by both parties. In a worst-case scenario this may end up in front of a judge and be decided by a court order.

We Can Help

Deposits, down payments and legal ramifications—there is a lot to know when buying a home. That’s why we always recommend you use a REALTOR®. A real estate agent will walk you through every step of the process while keeping your best interests in mind.

Did you know that it doesn’t cost you anything to use a REALTOR® to help buy your home? Read our blog on Why You Should Use a REALTOR® When Buying or Selling A Home. And as always, I invite you to give me a call if you have any questions!

*All information provided by the Brantford Regional Real Estate Association (BRREA) for the highest sales volume and highest number of completed transactions since January 1, 2015. All Brantford MLS® House Listings come from the various systems operated by Real Estate Boards and Associations across Canada. The trademarks REALTOR®, REALTORS® and the REALTOR® logo are controlled by The Canadian Real Estate Association (CREA) and identify real estate professionals who are members of CREA. Used underlicense. The trademarks MLS®, Multiple Listing Service®, and the associated logos are owned by The Canadian Real Estate Association (CREA) and identify the quality of services provided by real estate professionals who are members of CREA. Used under license.

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