A common question we receive from buyers is how much of a deposit is required when submitting an offer to purchase a home? This will depend on whether you are buying a new build or a resale home. The builder of a new build will most likely have a deposit schedule, the first installment will be submitted with your initial offer and the additional installments at predetermined intervals moving forward. An example would be a total deposit of $20,000. $5,000 due upon acceptance, another $5,000 due at 60, 90 days concurrently.
When buying a resale home the rule of thumb in most markets is up to 5% of the purchase price. The amount varies from market to market, in smaller markets it could be as little as a few thousand dollars. Keep in mind that the larger the deposit, the more attractive it can be to a seller as it shows you have a vested interest in proceeding.
There are 2 options available when submitting a deposit and they are to either submit the deposit with your initial offer (herewith) or to submit it once your offer has been accepted (upon acceptance). Your agent will determine which option is best suited for your situation.
If you choose to submit your deposit upon acceptance, you will have 24 hours from that time to deliver the deposit to the listing brokerage. You will be required to provide a bank draft or certified cheque, made out to the listing real estate brokerage. It will be held in trust until closing where it will be credited toward the purchase price. (*For this reason, it is important that the funds you intend to use for the purpose of the deposit are easy to access.)
Not providing the deposit within 24hrs following acceptance could cause you to lose out, especially if there is another buyer waiting in the wings. To avoid complications and breach of contract, be sure you respect all time limits as stated within the agreement of purchase and sale.
If your offer contains conditions that you are unable to fulfill, for example financing, you and the seller through mutual agreement will have to sign a mutual release in order to have your deposit returned to you without deduction. If your offer does not contain any conditions and for any reason, you are unwilling or unable to proceed, you’ll need your lawyer’s advice on how to proceed. You will most likely lose your deposit and could be sued for additional costs. Be sure to do your homework and ask lots of questions ahead of time to avoid any mishaps.