What is a Deposit When Purchasing a Home in Ottawa?

When you put an offer in on a home in Ottawa, you will have to put a deposit down with your offer as well. This is a small fraction of the final purchase price which will be paid in full once the purchase becomes ‘firm’.

A deposit is due within 24 hours of your offer being accepted, anywhere in Ontario, unless otherwise stated. You must ensure that you have your deposit funds ready before you start ‘seriously’ searching for a home - so that you are ready to put in an offer as soon as you find the right home for you.

The reason deposits are submitted with an offer is to show that an offer is legitimate and illustrates that the buyer also has a stake in the offer. Sellers can rest assured knowing that they are protected from the deal falling through (by means of this deposit), and buyers

Typically, deposits are paid through bank draft, wire transfer, or other means depending on the brokerage. There is no requirement in Ontario by law for how much or how little a deposit should be, but the traditional amount is 5% of the offer submitted on that home.

If the offer is accepted, the money you have submitted in your deposit will be used towards the purchase price of the home. So you will not be paying your full offer as well as the 5% you already submit - you will just be paying the other 95% of your offer!

In general, the higher your deposit is, the more appealing it is to your seller. It shows how serious you are about purchasing a home, and also your buyer power. A low deposit would, in contrast, illustrate that you are not as serious about the deal going through, or that you may have troubles with financing.

However, that being said, you don’t want to put in an unnecessarily high deposit either and risk losing a good portion of your money, especially if there is a risk that the deal may fall through on your end.

If for whatever reason you cannot get your money together for the deposit in time, you can still put in an offer, and should include within the offer when you will be able to transfer the funds to the seller. If this is the case, your offer may become less desirable to the seller than others in the case of a bidding war, so this should be a last resort.

After you’ve made your offer, the deposit is most often held in the trust of the listing brokerage (the seller’s brokerage). These trust accounts are regulated and audited, so you will not have to worry about the safety of your money. Furthermore, your deposit is protected when you work with a real estate agent through their insurance program. They are required by law to have this insurance.

If you cannot close on the deal, whether or not you get your deposit back will depend on the type of offer that you as a buyer made. If your offer was conditional, for example, conditional on you getting financing, and you did not obtain financing, this condition was laid out in the Agreement of Purchase and Sale, meaning you would get your deposit back. However, if you did not make your offer conditional on you obtaining financing and you fail to do so, you will not get your deposit back. So, it is important to be sure you can obtain financing or to ensure you have the right conditions in your offer.