A Guide to Real Estate Deposits

Buying a home is a significant investment, and the deposit is one of the most important aspects of the purchase.

A deposit is a sum of money paid by the buyer to show their commitment to the purchase, and it is usually a percentage of the total price of the property. In most cases, the deposit will be held in a trust account until the sale is complete.

This ensures that the buyer has funds available to complete the purchase, and it also protects the seller from a buyer potentially backing out of the deal. The deposit is an important part of any real estate transaction, and it is important to understand how it works before making an offer on a property.

What is the Difference between a Real Estate Deposit and a Down Payment?

A deposit is a good faith payment made by a buyer to a seller in order to secure the purchase of a property. The deposit is typically a percentage of the total purchase price, and it is paid at or around the time that the offer is accepted, or once the offer is accepted and any subjects to the offer are removed.

The deposit shows the seller that the buyer is serious about purchasing the property and that they have the financial means to do so.

Once the deal is finalized, the deposit is credited towards the purchase price and forms a part of the down payment. The down payment is the balance of the purchase price that is paid at the time of closing.


Party A is buying a property from Party B for $520,000.
Party B accepts Party A’s offer to purchase the property. Party A subsequently pays a $26,000 (5%) deposit to secure the property.
According to the minimum down payment rules in British Columbia, if the purchase price is between $500,000 and $999,999, the minimum down payment is 5% of the first $500,000, and 10% of any amount over $500,000.
Therefore, Party A is required to pay $25,000 to cover the minimum down payment for the first $500,000 of the purchase price and then $2,000 for the remaining $20,000 of the purchase price.
So, the total minimum down payment is $27,000, which is due on closing of the deal.
The deposit is used towards the down payment and Party A is required to pay the balance on the closing date, another $1,000.

When is the Deposit Paid and Who is it Paid To?

In a typical home purchase, the deposit is paid when the offer is accepted, or when any subjects to the offer are removed. In most cases, it is common practice to pay the deposit within 24 hours of the subject removal.

The deposit is held in trust by the real estate agent or lawyer until the deal closes. At that point, the deposit becomes part of the down payment.

What Happens to the Deposit if the Contract of Sale is Breached?

The purchase of a home is not always a smooth process. Sometimes, the buyer and seller will come to an agreement, only to have the deal fall through at the last minute. When this happens, it is important to understand what will happen to the deposit.

If you breach the contract of sale (for example, if you fail to pay the purchase price on the agreed date), the seller may be entitled to keep your deposit. You may also be liable for additional damages suffered by the seller as a result of the breach.

However, if the seller is the one who breaches the contract, they may be required to pay damages to the buyer. In some cases, this may include returning the deposit, along with any accrued interest.

Ultimately, if a contract of sale is breached, it is important to consult with an experienced real estate lawyer to determine what your next steps should be.

Could You be Liable for More than Just the Deposit in Cases of Breach?

When a buyer breaches a contract during a real estate purchase, they may be liable for more than just the deposit. If the breach causes the seller to incur damages, the buyer may be responsible for those as well.

For example, if the buyer backs out of the deal and the seller required the sale funds from the deal to purchase another property the day following the sale (for which the seller has paid a deposit), the seller may be able to sue the buyer for loss of the deposit and other damages.

As a result, it is important for buyers to be sure that they are ready to commit to a purchase before signing a contract. By understanding the potential consequences of breaching a contract, buyers can help to protect themselves from financial liability.

How Can Solimano Law Help?

The team of real estate lawyers at Solimano Law can help with real estate transactions in several ways.

They can draft or review the purchase agreement prior to offering to ensure that the contract terms protect you. They can also help resolve any disputes that may arise during the course of the transaction, such as negotiating a settlement if the deal falls through. In summary, a real estate lawyer can provide valuable assistance to protect both buyers and sellers during a real estate transaction.

If you would like assistance with your real estate transaction or have any questions, please contact us today.

Disclaimer – The information contained herein is of a general nature. It is not intended to be legal advice and it is not intended to address the exact circumstances of any particular individual or entity. No one should rely on or act upon such information without receiving appropriate professional advice and without a thorough examination of their particular situation. Please contact our office if you have any questions with respect to the content of this entry, this website, or our Terms and Conditions .