Buying a home – Deposits
Every time an offer on a home occurs in the province of Alberta, it only becomes legally binding once some sort of financial consideration has been made- ie. a deposit.
As discussed in the previous post, part of making an offer is giving a deposit. This deposit can be anywhere from 1 dollar to the full purchase price. However, a common deposit may be somewhere around $2500-$10000 on a house under 500,000 to $20,000-$50,000 for a home over $500,000. These amounts will vary and are all part of the negotiating process when presenting an offer.
The way the deposit works is this – once an offer is accepted, the deposit is given by the buyer and held in trust by the sellers real estate company. Now most likely your offer would have conditions on it. If everything is fine and you are able to remove conditions, your deposit is forwarded directly to the sellers lawyer who will then hold in trust until possession. This deposit counts toward whatever downpayment you will putting on the house.
If for some reason, you can not remove conditions, the deposit will be returned to the seller in full. NOTE: As long as you are abiding by the terms of the legally binding contract, the deposit will be returned. If, for example, you have only a financing condition on the property, but as you were waiting to go through with the deal, another WAY better house that you prefer comes on the market so you decide not to remove your finance condition and buy the other one instead, the seller has a strong case to hold your deposit. In this case you are able to meet the conditions (able to receive financing on the property) but choose not to proceed for other reasons, so you are in fact breaking the terms of the contract.
The deposit is designed to protect the rights of the seller, as well as demonstrate the willingness of a buyer to proceed with a purchase. 99 out of 100 times things go as planned, but as both a buyer and a seller, it is in your best interest to know all scenarios that may affect you should something go awry.
