Deposits on purchase – how much and where does it go?

You've just found the perfect home and are discussing the terms of your offer.  Along with your offer, it's customary to submit a deposit to show the Seller your intention and commitment to complete the purchase.  The question always arises as to what amount of deposit is considered appropriate.  The amount of the deposit will depend largely on the purchase price, local customs, circumstances ( multiple offer situations ) and of course the amount of cash you have readily available.  'Readily available' is key here as once the offer has been accepted by all parties, the deposit must be delivered to the Selling Brokerage within 24 hours of the acceptance.

The deposit is generally in the form of a Bank Draft or Certified cheque and is held in the Brokerage Trust Account until the transaction is complete at which time it's applied to the purchase price.  It's important to note that the funds in the Brokerage Trust Account are insured through a Deposit Insurance Program provided by the Real Estate Council of Ontario ( RECO ) for registered Members, Sales Representatives and Brokers.

In cases where a conditional offer has fallen through ( for example a not-so-favourable home inspection or the bank hasn't approve the financing ) there is generally a statement attached to the condition that requires the deposit to be returned to the Buyer without penalty.  At this time, a written Mutual Release is signed by the Seller and the Buyer so that the Brokerage can release the funds back to the Buyer.