Deposit

Explore what a deposit means in Canadian real estate transactions, how much is typical, and why it’s a vital part of making a serious offer on a home.

Deposit
Escrow – Definition, Meaning, and Examples in Canadian Real Estate



What is a Deposit?

A deposit is an upfront payment made by a homebuyer to show their good faith and commitment when submitting an offer on a property. It forms part of the total purchase price.

Why Deposits Matters in Real Estate

In Canadian real estate, the deposit is a critical part of any offer to purchase. It demonstrates the buyer’s seriousness and is held in trust – typically by the seller’s brokerage – until closing.

If the transaction goes through, the deposit is applied toward the purchase price. If the buyer backs out without a valid reason under the contract, the seller may be entitled to keep the deposit as compensation. Conversely, if the seller defaults, the buyer may be entitled to a refund.

The amount of the deposit is negotiable but usually ranges from 1% to 5% of the purchase price, depending on market conditions. In competitive or high-value markets, larger deposits can strengthen an offer and signal financial readiness.

Buyers should ensure the deposit funds are readily available, as delays can breach the terms of the Agreement of Purchase and Sale. Legal and real estate professionals help structure deposits to protect both parties and reduce transaction risk.

Example of a Deposit

A buyer submits a $30,000 deposit along with their offer on a $750,000 home in Calgary. The deposit is held in trust and later applied to the purchase price on closing day.

Key Takeaways

  • An upfront payment showing a buyer’s commitment to a property purchase.
  • Held in trust and applied toward the final sale price.
  • Helps protect sellers from buyer default.
  • Amount varies but often ranges from 1% to 5% of the purchase price.
  • Must be submitted promptly as per contract terms.

Related Terms

  • Agreement of Purchase and Sale
  • Conditional Offer
  • Firm Offer
  • Closing Date
  • Good Faith

Additional Terms

Recourse Loan

A recourse loan is a type of loan where the lender can pursue the borrower’s personal assets, beyond the collateral, in the event of default.. more

Pari Passu

A pari passu clause is a contractual provision ensuring that multiple creditors share equally in repayment priority from the borrower’s assets.. more

Non-Recourse Loan

A non-recourse loan is a type of loan where the lender’s only remedy in case of default is to seize the collateral property; the borrower is not. more

Net Operating Income

Net operating income (NOI) is the total income generated by a property after operating expenses are deducted but before taxes and financing costs.. more

Mechanic's Lien

A mechanic’s lien is a legal claim by a contractor, subcontractor, or supplier for unpaid work or materials provided for a property.. more

Lis Pendens

Lis pendens is a legal notice filed in the land registry indicating that a property is subject to ongoing litigation that may affect its title.. more

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