|
|
|
|
Legal Line® provides Free legal information to Canadians through its website, telephone and fax-on-demand systems.
1,000 topics are covered within 35 areas of law...
Search...
Ontario|Real Estate LawBuying A Home 397 The deposit When an offer to purchase is made, the purchaser usually gives the seller a deposit towards the purchase price. The deposit assures the seller that you are serious about the purchase and intend to complete the deal if the offer is accepted.
- Deposits for re-sale properties
Deposits for re-sale properties can be in any amount, although deposits from 2% to 5% of the purchase price are typical. An offer with a higher deposit may be viewed as more attractive by a seller than one with a small deposit.
Although the deposit will be credited to the purchase price and deducted from the amount due on closing, it is not normally paid directly to the seller. In most cases, deposits are made payable to the listing agent "in trust". This will require the listing agent to keep the money in a trust account until the closing date. Once the deposit has been credited to the purchase price on closing, the seller will usually authorize the agent to deduct commission from the deposit.
- Deposits for new homes
For new homes, the deposit is usually payable directly to the builder, and not held in trust. Builders may also require higher deposits than normally paid for re-sale properties. This allows the builder to use the money towards ongoing construction costs. Because of the risk that the buyer may lose the deposit, the Ontario New Home Warranty Program insures deposits up to $20,000. If the builder fails to complete construction of your home and files for bankruptcy, you can make a claim against the Warranty Program to recover your deposit. Since the deposit insurance is limited to $20,000, purchasers should be cautious about giving a higher deposit and may decide to make any excess deposit over $20,000 payable to the vendor's lawyer in trust.
|