— We take our content seriously. This article was written by a real person at BREL.

Note: I’m not a lawyer, and this shouldn’t be construed as legal advice. Think of this blog as general information and get a legal opinion if you need it.

What’s a deposit in real estate?

A deposit is paid by a Buyer on the successful agreement of the purchase/sale of a home, and forms part of the final purchase price.

In real estate, a deposit serves two purposes:

  1. Provides security to the Seller – A deposit ensures that the Buyer has a stake in the agreement and something to lose if they walk away and refuse to close on a purchase.
  2. Pre-estimates damages – In the event of a breach of the contract by the Buyer, the deposit serves as a signal to the Court of a pre-estimated amount of damages.

In Ontario, a deposit is usually paid by certified cheque or money order.

How much should the deposit be?

Truth: The higher the deposit, the more attractive the offer.

In real estate, there is no fixed amount of deposit required by law. While deposits are technically negotiated between the Buyer and the Seller, local customs usually indicate what is ‘acceptable.’ In Toronto, 5% of the purchase price is usually seen as ‘normal’. When we bought our house in Prince Edward County, a flat $1000 was “normal” at the time.

The risk of offering a deposit that is lower than expected is that it will be rejected by the Seller and may make you seem like an unserious Buyer, or worse, a financial risk.

If you’re in a bidding war, the size of your deposit will most certainly be one of the factors taken into consideration, and I’ve seen Sellers accept a lower price for a higher deposit.  

When is a deposit due?

In Ontario, a deposit is normally due within 24 hours of an Agreement of Purchase and Sale (APS) being accepted, unless it’s otherwise specified and agreed-to. 

The standard wording of the APS states “24 hours” – not “one business day,” so if you enter into an agreement at 11 am on Saturday, the deposit is due by 10:59 am Sunday. Note that your agent can outline alternate deposit arrangements in the agreement (e.g.,. ‘by 6 pm on Monday, November 5’).

In multiple offer situations (i.e., bidding wars), it’s good practice to provide a certified deposit at the same time as the offer. That lessens the Seller’s risk of having to deal with buyer’s remorse the next day and will strengthen your position against other bidders.

Pro tip: Even if you’ve just started the house hunting process, make sure that your deposit (around 5% of the purchase price in Toronto) is liquid and isn’t locked away in a virtual bank or investment. Many Buyers get a line of credit in advance of a purchase and use that to fund the deposit if their money is in investments or RRSP’s.

What happens if a deposit is late?

If your deposit doesn’t arrive in time, you will be in breach of the agreement, and the Seller could potentially walk away from the deal. We see this happen when another potential Buyer has materialized, and the Seller sees an opportunity to sell the house for more money. Don’t be late with your deposit.

Where is a deposit held?

The deposit is normally held by the listing brokerage, in a trust account. Trust accounts are highly regulated and routinely audited. Deposit money held in trust cannot be used to pay the brokerage’s expenses (salaries, rent, etc.)

Your deposit is insured.

There’s an insurance policy that covers your deposit up to a maximum of $200,000 per claim. If your deposit exceeds $100,000, you may be asked to provide two deposits (one to the seller’s brokerage and one to the buyer’s brokerage or the seller’s lawyer) to reduce risk. If the brokerage holding your deposit goes bankrupt (this is extremely rare), all claims cannot exceed $4,000,000.

As a Buyer, can I refuse to provide a deposit?

Sometimes, in the fury of a bidding war, a Buyer pays more than they anticipated and they wake up the next day with regret. If the offer was firm (meaning there were not conditions like financing or home inspection), they must proceed with the purchase and must provide a deposit. Agreements in Ontario are signed under seal and are binding, and not providing a deposit as per the agreement could get you sued.

What happens to your deposit at closing?

A deposit is applied to the Buyer’s closing costs and forms part of the purchase price at closing. So if a Buyer paid $800,000 for a home and provided a $40,000 deposit, that amount + any additional downpayment + the mortgage money from the lender will be provided to the Seller (less the expenses and adjustments).

I’m a Buyer. What happens to the deposit if I don’t get financing?

If your offer was contingent on obtaining financing and you are unable to obtain financing during the conditional period (and thus you do not waive the condition), your deposit will normally be returned to you in full, without deduction. Note that if your Agreement of Purchase and Sale states something different, whatever you’ve agreed to in writing will be what applies to your situation. Read everything before signing!

It’s important to note that a deposit is only returned with the agreement of both the Buyer and the Seller or by Court order, so if a Seller does not believe that a Buyer acted in good faith in fulfilling a condition, they can refuse to release the deposit.

If your purchase was not conditional on financing or you previously waived the condition and now are unable to obtain financing, call your agent and call your lawyer. You will likely lose the deposit you provided and may get sued for any damages the Seller has. This is not good.

What happens to my deposit if I don’t waive the home inspection clause?

Depending on the wording of the home inspection clause you signed if you don’t waive or fulfil the home inspection condition in the specified time period (e.g. 3 days), you will likely get your deposit back.

Remember: a Seller doesn’t have to fix deficiencies identified in the home inspection unless they agree to, which is incredibly rare in Toronto. If you decide not to waive the home inspection clause, the Seller is free to sell to someone else.

Also: remember that there is an expectation of good faith – meaning a Buyer can’t just use the home inspection clause to get out of a purchase if they’ve changed their minds. It legitimately has to be because of the home inspection.

I’m a Seller. What happens to the deposit if the Buyer doesn’t close on the transaction?

In most cases, if a Buyer does not close on a firm sale (in other words, all conditions have been met), the Buyer forfeits the deposit and may be sued for additional damages. This is serious, and messy, and your lawyer will guide you through the process.


  1. Gerelyn Jandayan-Brennan says:

    My husband and I have signed a non waiver form as the house we put a deposit on turned out to be on a wood foundation and not concrete, as advertised in the listing, after the home inspector told us. We requested to get the deposit back and was told by law, the brokerage trust will hold the money for 10 business days before releasing it. My realtor’s company only holds it for 5 business days. Why are they putting a hold on our deposit cheque for 10 long days?

  2. My daughter and I own a house which we have had to put on the market. We received an offer with a couple of conditions but before the conditions had been met the buyer backed out even through they had presented an offer with a deposit of 30k an it was accepted.Four people brought the house but one wasn’t there at the time, four days later the fourth person vied the house and said that she wouldn’t be apart of the purchase which then the other three withdrew as well. There was no mention of a condition that included acceptance by the forth person…Is there any repercussions that we are entitled too?

    • Melanie Piche says:

      Your REALTOR and lawyer will be able to give you a much better answer, given they know what’s included in the contract and the situation…but without knowing the specifics, if they had a financing condition in the offer, the 3 people (vs 4) probably can’t get the financing they need, so that would be a legit reason to back out using the financing condition (and thus they’d be entitled to getting their deposit back).

  3. My fiancé and I put an offer on a house and signed all the papers, but we suddenly had issues coming up with the deposit. Is there any penalty before the deposit has been given and all the documents have been signed?

    • Melanie Piche says:

      You’ll need to talk to your REALTOR/lawyer asap. If you signed under seal (which is normal in Ontario), then you are still bound by the agreement, so there could be penalties.

  4. Our aunt just signed a deal to purchase a condo on Friday. On her behalf we attempted to deliver the deposit to the seller brokerage the next day (Saturday) who is an independent agent that works out of his own condo. He wasn’t available and was in fact out of town at the time we were attempting to deliver it. Are we still considered in a breach of contract if we did everything we were legally obligated to do but was unsuccessful in delivering the deposit within the 24 hr time frame due to the brokerage not being available to receive it?

  5. I owned a condo, and I have decided to sell it. I have signed all the papers, and the buyer has provided a 25000 deposit and it is now under the trust account of my real estate agent. How long will it take for me to get access to the deposit? I have to wait untill closing day?

  6. We have sold our home it’s all cash offer no subjects except we put in as a seller for us to find a property we found a property we are about to remove subjects. The buyer of our home is now trying to back out even though all contracts are signed but deposit has not been made yet. Is this breach of contract?

  7. Hi, I am the worst scenario right now, I got preapproved for a mortgage, I found the house and paid 10 thousand dollars for a deposit, but the mortgage broker and the bank made a mistake by giving me the preapproval without verifying an specific document and the mortgage is down, I can’t go forward with the purchase, as a buyer what can I do the get my money back, I acted in good faith with the seller, Do I have to sue the bank and the broker? I need help please

    • Brendan Powell says:

      You should be speaking with your realtor and lawyer about your specific situation. If your deal included a condition on financing, that would typically give a specific time frame for a buyer to confirm their mortgage details, with the option to back out if financing does not come through. If the deal is firm, i.e. there is no such condition or that condition has already been waived, then the agreement would be legally binding on both parties, and there would typically not be a way for either side to unilaterally get out of the deal without repercussions. If this is the case, at that stage a buyer’s financing would not be a valid reason to back out of a deal or have a deposit returned unless both parties agree to this. Buyers in this position are advised to speak to their lawyer about options, which could include alternative financing options (and still closing on the purchase) or approaching the seller to see if they will let you out…although they would not be under any obligation to. Again, speak with your representatives for specifics! Best of luck.

  8. Hi

    I try to buy a condo six month ago i deposited 20.000 into realtor’s trust account without financing condition.
    I got the mortgage day after closing date and ask for extension but seller didnt give me one more day
    They didnt even sign mutual release just stop comunicating with me . 6 month went by the condo sold to someone else more than i offered in the first place.
    Question 1
    Is it possible for me to get my deposit back
    Or take this issue to trail to sue them
    Question 2
    Even if i wanna let go of my deposit , do i have to sign mutual relaese with seller to prevent them from coming after me
    Question 3
    They sell the condo higher price than i offered and they are holding my deposit .In this case they can still come after me and sue me

    • You should speak to your lawyer about this.
      What I can say is that a deposit cannot be released except by mutual agreement (eg a mutual release) or by court order.

      If you as the buyer have breached the agreement (eg by not closing as agreed, which it sounds like may have happened), then the deposit may very well be considered pre-negotiated damages and forfeit—regardless of whether they sell the home again later for more $. Speak to a lawyer about your liability before you sign anything of course. Sorry this happened to you.

  9. Painful Home sale says:

    A buyer who signed an APS with us failed to negotiate a deposit. He provided a personal cheque which did not clear the bank. Our realtor witheld this fact from us, and instead worked with us to close on purhase of a replacement home; while the buyer did subsequently provide a certified deposit (14 days after the conditions had been waived, no regard for time being of the essence), in the end he didn’t tender the remaining funds on the scheule closing date, ultimately breaching the contract. We have won a lawsuit to have him found responsible for damages, although we are having difficulty executing on that judgement; my question to you is what responsbilty/liability rests with our agent for failing to inform us when the deposit didn’t clear i.e. failed to advise us tha thte contract was in breach, and as such the home was not sold and we therefore should not proceed to purhase a replacement home? RECO has issued a ruling but unlike other RECO disputes didn’t lay any fines on the realtor. We are considering pursuing legal recourse.

    • Brendan Powell says:

      Sorry to hear you are going through this. As you can imagine, we aren’t in a position to comment on a legal matter that we aren’t privy to. This should be a conversation with your lawyer, based on the specific facts of the case. I wonder at what point the bounced cheque would have been discovered, by whom and what was done at that point. While you may very well have a case, it’s worth noting that individual agents would not have access to the trust accounts and unless an administrator or someone handling the finances informed them of the bounced cheque they would have no way of knowing…but of course SOMEone would/should have realized eventually that the deposit funds did not actually clear. What happened at that point would be critical.
      This kind of situation is why deposits are often (in Toronto almost always) requested to be delivered as a bank draft or certified cheque. Best of luck.

  10. Hi,In case the contract becomes void and the seller has to return the initial deposit to buyer as per the contract, what is the normal timeline to give that initial deposit back?

    • Brendan Powell says:

      There is no easy answer to this, as it can depend on a few factors—sometimes the seller wants to dispute things and hold onto the deposit for some reason (unusual but can happen). Most commonly, delays can be because of brokerages guarding against fraud—-in our case, for example, if a deposit was given by cheque, we have to wait long enough that the cheque has 100% cleared and legit before we can refund it—-this can be 7 days for certified cheques or as long as 20 days for personal cheques. Unfortunately a common scam is to make a deposit using a fraudulent cheque, then immediately back out of the deal and request a refund. If funds are returned too quickly and the original fraudulent cheque not detected until later, the brokerage could be on the hook for thousands.
      Either way it always feels longer than it should be when you’re on the other end and it’s your money!


    OREA 105 Schedule B of a firm agreement has above clause. Buyer did not make a deposit. Did he breach contract?

    • Brendan Powell says:

      Yes. Buyer is now in breach. If everyone chooses to move forward and the deposit ends up being delivered, the sale can move forward, BUT the seller has options. Talk to your realtor and lawyer.

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