Understanding Deposits in Ontario

What Is a Deposit

A deposit in a real estate transaction is a sum of money the buyer provides when making an offer to demonstrate good faith and financial commitment. It is not an additional cost on top of the purchase price. The deposit is credited toward your down payment at closing and forms part of the total amount you pay for the property.

In Ontario, there is no legally mandated minimum deposit amount. However, market norms in the GTA typically call for a deposit between 3 and 5 percent of the purchase price. On a $800,000 home, that means a deposit of $24,000 to $40,000. In competitive situations, some buyers offer larger deposits to signal financial strength.

When Is the Deposit Due

The timing of the deposit is specified in the Agreement of Purchase and Sale. In most GTA transactions, the deposit is due within 24 hours of the offer being accepted, or as otherwise described in the agreement. The deposit is typically delivered by certified cheque, bank draft, wire transfer, or e-transfer to the listing brokerage, which holds it in trust.

Some offers structure the deposit in two parts. An initial deposit is submitted upon acceptance, with a second deposit due at a later date, such as when conditions are waived. This structure gives the buyer time to arrange the funds while still demonstrating commitment upfront.

How Is Your Deposit Protected

Your deposit is held in a trust account maintained by the listing brokerage. Under the Trust in Real Estate Services Act (TRESA), brokerages are required to maintain these trust accounts separately from their operating funds. The deposit does not go directly to the seller.

The deposit remains in trust until the transaction closes, at which point it is released and applied toward the purchase price. If the deal does not close, the release of the deposit depends on the circumstances of the termination.

Getting Your Deposit Back

If you have a conditional offer and you terminate the agreement within the condition period because a condition was not satisfied, your deposit is returned to you. This is the standard process and the primary reason conditions exist: to protect your financial commitment while you complete your due diligence.

If you fail to close on a firm deal or let conditions expire without formally waiving or terminating, the situation becomes more complicated. The seller may claim the deposit as compensation for damages. In disputed cases, the deposit remains in the brokerage's trust account until both parties agree on its release, or a court issues a direction.

To protect yourself, always communicate clearly with your agent about condition deadlines. If you need more time, your agent can request an extension from the seller before the deadline passes. Missing a condition deadline without taking action puts your deposit at risk.

Deposit Size and Offer Strength

While there is no legal minimum, the size of your deposit sends a message. A larger deposit tells the seller that you are financially capable and serious about the purchase. In a multiple-offer situation, the deposit amount is one factor sellers use to evaluate the strength of competing bids.

That said, do not overextend yourself. Your deposit should be an amount you can access quickly without financial strain. If the deposit is so large that arranging it causes delays or puts you in a difficult position, it defeats the purpose. Work with your agent to determine an appropriate deposit amount for the specific transaction and market conditions.