To people who have never needed the services of a real estate professional, the industry may seem shrouded in mystery.
Our professionals on the Newbigging-Pearson real estate team hear all kinds of questions from our clients daily: Who hires the lawyer; the realtor’s team or me? What do all the legal terms mean? Why do lawyers use latin phrases? What is a letter of intent? How do I get my bank involved? How do I determine my closing costs? Who looks after figuring out partial utility payments – me or the utility company? What will taxes be on my home purchase? How long in advance should I change addresses and notify my utility companies of my upcoming move? How long do I have to change the address on my driver’s license? What is land transfer tax? How long should the home inspection take, and do I need to hire the inspector, or does the buyer hire the inspector? What do I do during the final walk-through? If demand for a home in a good area is high, it might have multiple offers. How do I decide what to “up” in my offer to get that house – or what conditions to waive?
There are endless questions, all of them good! One of our most frequently asked questions is this one: “So, I need to make a real estate deposit to go with this offer for purchasing a home … what amount do I provide, and where does my deposit go?”
In Ontario, a homebuyer has a couple options when it comes to making a real estate deposit. Most opt for including a cheque with their offer, but some buyers prefer to provide a cheque within 24 hours of the seller accepting their offer.
Making a real estate deposit shows the seller you are serious about purchasing their home. In legal terms, that’s called “consideration.” The deposit acts as consideration for the offer to purchase the home, and binds the buyer to the contract.
If the real estate deposit cheque arrives late, the seller has the right to refuse your offer and place the home back on the market.
How much should the real estate deposit be?
Well, the deposit amount may vary by region. In larger Canadian cities, it can go as high as 10 per cent of the purchase price; in smaller cities and towns in Ontario, it varies from one per cent, to as much as 10 per cent. Some home sellers stipulate a certain amount, to attract serious buyers only.
OK, so your offer to purchase a home in Niagara has been accepted, and you have written the real estate deposit cheque – what happens to the cheque now?
Your cheque in the agreed-upon amount is handed over to the seller’s realtor, who transfers it to an account in trust, to be applied to the purchase price at closing date. The real estate deposit is held in trust, or escrow, so that it is insured through the real estate brokerage, to be released only at closing or if the seller and homebuyer dissolve their contract.
If the sale should fall through, the deposit cannot be released unless both the homebuyer and the seller agree to do so. If the two parties cannot agree to sign off on ownership of the real estate deposit, it will be up to a judge to decide who gets it back, and it can take years to get through the courts.
Once all conditions of sale, including those as set out in the home inspection report have been met, the homebuyer and seller can proceed to closing their deal.
To find out more about what happens on closing day, visit our previous blog, “It’s closing day. Now what?”
The real estate closing process is complex, but with the Newbigging-Pearson real estate team of professionals behind you, it’ll be a smooth ride home.
So go ahead, ask all the questions you want! This is a life-changing event, and we want you to be comfortable at every step of the way. For our team of professionals, answering all your questions is #noproblem!
Ready to make a change? Reach our Newbigging-Pearson real estate team at 289-686-1552,
Sources: Realtor.com, Toronto Realty Blog, Legalline.ca