What happens the Buyer’s deposit after subject removal?
When a Buyer writes an offer on a property, he will need to state the deposit amount that he will be paying. The amount of the deposit is usually 5-10% of the purchase price. However, this amount may be negotiated between the Seller and Buyer, along with other terms of the contract (purchase price, possession date, etc.).
The deposit is made payable to the Buyer’s brokerage office (i.e. Century 21 In Town Realty) in trust. When a Buyer prepares the deposit it is important to write “Century 21 Realty In Trust” rather than just “Century 21 In Town Realty”, since the funds need to be held in a trust account. The Real Estate Services Act requires that a deposit cheque of $5,000 or more received by a REALTOR® must be submitted to the brokerage office and deposited to brokerage trust account.
This means when you give Century 21 In Town Realty a deposit cheque on a home, it is held in a brokerage trust account until the sale completes, for a minimum of 30 days, and will be applied towards the purchase price of the property.
Real Estate Brokerages hold trust monies as impartial stakeholders on behalf of both the Seller and Buyer, and trust monies cannot be paid out of the account without the agreement of both parties.
The first page of the contract includes the following section regarding the Deposit:
2. DEPOSIT: A deposit of $_____________ which will form part of the Purchase Price, will will be paid on the following terms:
within 24 hours upon final subject removal by way of bank draft made payable to Century 21 In Town Realty in Trust
All monies paid pursuant to this section (Deposit) will be paid in accordance with section 10 or by uncertified cheque except as otherwise set out in this section 2 and will be delivered in trust to Century 21 In Town Realty and held in trust in accordance with the provisions of the Real Estate Services Act. In the event the Buyer fails to pay the Deposit as required by this Contract, the Seller may, at the Seller’s option, terminate this Contract. The party who receives the Deposit is authorized to pay all or any portion of Deposit to the Buyer’s or Seller’s conveyancer (the “Conveyancer”) without further written direction of the Buyer or Seller, provided that (a) the Conveyancer is a Lawyer or a Notary; (b) such money is to be held in trust by the Conveyancer as a stakeholder pursuant to the provisions of the Real Estate Services Act pending the completion of the transaction and not on behalf of any of the principles to the transaction; and (c) if the sale does not complete, the money should be returned to such party as a stakeholder or paid into Court.
For more detailed information about the Contract of Purchase and Sale, Deposits, buying and selling property, or Vancouver’s real estate market today, please don’t hesitate to contact me!