I’ve found a property that I like, and the seller has requested a deposit of $50,000. If I change my mind, can I get my deposit back?
In most cases, once negotiations are concluded, and conditions are satisfied, a real estate transaction deposit is non-refundable, except in limited circumstances. You will want to be certain that the property you put a deposit on, is the one you want. A deposit of that size is a substantial amount of money to put down for a property that you feel you could change your mind about.
By presenting a deposit, you are providing your assurance of good faith and solidifying your intention to follow through on your commitment to finalizing the purchase.
There is no rule or standard calculation regarding what constitutes an appropriate amount of money for a deposit, nor, is there a cap on how much a seller can request from a buyer as a deposit.
Nonetheless, if you are uneasy with the owner’s request for a large deposit, you could ask your real estate representative to try to negotiate a lower deposit amount with the seller. You could also propose putting less deposit down initially and then providing an additional deposit after all of your conditions are satisfied, and you are more confident in your commitment to moving ahead with the purchase. By working closely with your real estate representative and your lawyer, it is likely that you can settle on an amount that satisfies both you and the seller.
The deposit is an important factor in a negotiation and a subsequent Agreement of Purchase and Sale (APS). Once the APS is signed and the deposit submitted, there may be significant consequences if you change your mind about purchasing the property. For example, you could not only lose your deposit, but the seller could sue you for damages, legal fees, carrying costs and any difference between the amount of you had agreed to purchase the property for and the amount they obtained from another buyer.
As mentioned above, in certain circumstances, deposits are returned to would-be buyers. For example, if you are a purchaser and your APS is conditional on you obtaining financing within a set time, you’ve used your best efforts to obtain financing but are still unable, and you don’t waive or provide notice to the seller that you’ve obtained financing, you may be able to get your deposit back. Your real estate representative would be able to explain these scenarios with you and help you to draft an appropriate condition(s).
In any event, to get your deposit back, both you and the seller would have to agree and complete the necessary paperwork to release the funds. In an amicable situation, it is a pretty straightforward procedure; however, if the seller has reason to refuse the release of the funds, you may have to obtain a court order. A disputed deposit release is typically held in a trust account, with the seller’s brokerage, and the dispute between the buyer and the seller becomes a legal matter.
Cases involving deposits of $35,000 or less can be decided in Small Claims Court, which is relatively inexpensive and accessible for Ontarians to use. Cases involving larger deposits, however, are decided in in a court of law.
If you’re serious about buying this house, I strongly recommend working closely with your lender, real estate lawyer and a real estate salesperson before you commit yourself to a deal and hand over a deposit.
If you have a question for Joe about the home buying or selling process, please email email@example.com.
Joseph Richer is Registrar of the Real Estate Council of Ontario (RECO). He is in charge of the administration and enforcement of all rules that govern real estate professionals in Ontario. You can find more tips at reco.on.ca, follow on Twitter @RECOhelps or on YouTube at http://www.youtube.com/RECOhelps.