Offer To Purchase, The Deposit, and You

Common questions we get as REALTORS often surround the deposit.  The deposit that accompanies an offer to purchase can be one of the most crucial pieces of the contract, as well as one of the most confusing for some buyers and sellers.

How much do I need for a deposit?

When it comes to an offer there are two competing sides, one that wants as big of a deposit as possible, and the other wants to give up as little as possible.  There is no set amount of what is acceptable.  The amount needed varies with each buyer and seller, the details provided on financing terms, the possession date, the supply and demand in the market, and the two associates that are representing the two parties and how ell they represent both side.  Yes, the negotiating plays a part.  A winning strategy often involves your buyer representative advocating on your behalf the virtues of you as a buyer and why your deposit is as written.  They may recommend that you provide an initial deposit as well as additional(s) deposit(s).  All of the strategies your agent employs will depend on the market for that property.

Is my deposit cheque for my offer cashed?

Yes.  Section 3.2 of the offer to purchase states:

3.2 The Initial Deposit shall be deposited no later than the third Business Day following the day that Final Signing occurred (as per clause 15.1). Additional Deposits shall be deposited no later than the third Business Day following the day the Additional Deposit is received by the brokerage.

Is it part of the purchase price?

Yes it is.  the deposit(s) plus financing plus any additional monies down equals the total purchase price.

Can I get my deposit back if something changes?

If that something is part fo the contract such as your conditions.  subject to financing or inspection for instance.  If you are unable to get financing or the inspection reveals something unsatisfactory to you then...

Yes you will get your deposit refunded according to section 3.5 states that following:

3.5 The Deposits shall be held in trust for both the Seller and the Buyer and shall be:

(b) refunded forthwith to the Buyer if this offer is not accepted;

(c) refunded forthwith to the Buyer upon the Buyer’s cheque clearing the brokerage’s trust account if a condition is not satisfied or waived (as per clauses 8.5 and 8.6) or the Seller fails to perform this Contract; and

When does my deposit got to the seller then, how does that work?

3.5 The Deposits shall be held in trust for both the Seller and the Buyer and shall be:

(d) forfeited to the Seller if this offer is accepted and all conditions are satisfied or waived and the Buyer fails to perform on this Contract.

At this point it is common for people to ask, "How do I lose my deposit then?"

A REALTOR friend of mine from Kelowna Century 21 Assurance Realty Jason Neuman, recently blogged "Top 10 Things Not to Do Before Closing".  I am "reblogging some of it here below, enjoy and Thank You Jason for the great post.  For the full article make sure you check out Jason's Blog post.

The Top 10 Things not to do before closing in a David Letterman format, starting with:

10. Make large undocumented bank deposits

9. Fail to disclose you're on probation with your employer, maternity leave or disability

8. Close credit accounts with zero balances

7. Co-sign a mortgage or loan for someone else

6. Change your job from full-time to part time

5. Doctor your employment or financial documents

4. Spend your down payment or closing cost money

3. Apply for new loans or credit

2. Stop paying your bills on time

1. Quit your job!

Sincerely, Jason Neumann


I've experienced this happen when I was representing a seller.  The buyer sold their home, and went shopping for a new truck and a couple of quads before they took possession of the home I had listed for sale.  The bank declined to forward the money as the buyer had now increased his debt load and no longer qualified.  Just because the bank says today you are approved does not mean it will not change.  Follow Jason's list, don't do any major shopping or make big changes to your life until after you've moved in.


Your Friend in Real Estate,

Patrick Galesloot

@pgalesloot on Twitter


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