This weeks question pertains to the deposit on an offer to purchase.
- I get the deposit if the buyer doesn't buy my house right? (asked from a seller)
A common question this is on what happens to the deposit and why we would ask and hold one. The deposit is part of the offer to purchase and would only be forfeited to the seller if the buyer removed conditions and failed to close on the contract.
I possible scenario where that may happen is:
A buyer removes their conditions on a property. Perhaps they misunderstood the instruction or "conditions" the bank place on their financing approval. Later the bank informs them "No we're not financing you." This can also happen if the buyer's credit changes significantly prior to closing. So, don't go shopping for new vehicles because you've learned you have good credit.
Basically in this situation the buyer has communicated in writing that they will buy your home and subsequently they can't because of whatever reason. The offer to purchase contract states:
3.5 The Deposits shall be held in trust for both the Seller and the Buyer and shall be:
- (a) applied against the Commission and paid directly out of trust to the brokerage(s) when the Commission is earned in accordance with the terms of the Listing Contract;
- (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
- d) forfeited to the Seller if this offer is accepted and all conditions are satisfied or waived and the Buyer fails to perform this Contract.
Often the confusion comes when a seller may think that they get the deposit if they can't get financing. That is not the case if that condition has not been satisfied or waived.
Deals collapsing or not closing after conditions are removed do happen but that is certainly not the norm. It is rare circumstances and events that would cause a buyer to not complete.