• Will I Lose My Deposit On My Home Purchase Offer?

    When you make an Offer to Purchase a house, you have to put down a deposit. In Ontario, the standard Agreement of Purchase and Sale allows the Buyer options with regards to payment of the deposit. Usually, the Deposit must be paid within 24 hours of an accepted Offer, however, I see more and more people having a Bank Draft prepared to go along with their Offer, to reassure the Sellers. In this type of Sellers Market where we are seeing Multiple Offers going in on a property, this could give your Offer an edge over the competition.  

    Can a Buyer get out of a deal by refusing to pay the deposit?
    The answer to this question is NO. Once a FIRM (no conditions) Offer is accepted by the Seller, you as a Buyer cannot change your mind. If you do, the Seller may relist the property and sell it to another Buyer. Further, if the Seller sells the property to a second Buyer and receives less money than what you offered, the Seller may sue you for its losses together with legal fees and other costs.

    What happens if the deposit is paid late?
    If a Buyer pays a deposit late, the Seller may elect to cancel the deal.

    Why is the deposit made payable to the Listing Agent’s brokerage and not the Seller itself?
    The simple reason is that by having the deposit held by the brokerage, the deposit is better protected.  If the deposit is given directly to the Seller, the Seller could disappear with the funds and the Buyer would have little recourse. By having the deposit with the brokerage, the funds are held in trust and protected by legislation.

    What happens to the deposit if the deal does not close?
    This is a common question and many are surprised by the answer. If the deal does not close, the deposit is not automatically released to either the Seller or the Buyer. The brokerage holding the deposit can only release the deposit if the parties sign a mutual release or by court order. Many Sellers are under the mistaken belief that they automatically receive the deposit if the Buyer breaches the Agreement and does not close. This is not the case. Conversely, if the Seller is at fault, the Buyer cannot demand the return of its deposit. In the event of a dispute between the parties resulting in the deal not closing, the parties must obtain legal advice to protect their respective interests.

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