Deposits serve two purposes-part payment of the purchase price, plus an assurance the buyer will close the deal. Usually an uncertified cheque accompanies the offer; when a deal is finally struck, the cheque is certified and the funds held by the listing agent.
If buying privately, be sure the deposit is paid to the seller’s lawyer in trust; otherwise, if the deal collapses, recouping your money from the seller is no easy task.
How large should the deposit be?
- Buyers like to pay the smallest amount possible, to avoid tying up too much money; but sellers want a large deposit, as a sign of the buyer’s good faith.
- Real estate agents prefer big deposits, also, since the larger the deposit, the easier for them to get paid after closing.
While there’s no “legal answer” as to what’s a proper deposit, 5% of the purchase price is not uncommon today.