In fact, we have so much valuable deposit information to share with you that we might be here awhile. So, settle in and get comfortable, because we have a lot of ground to cover.

The following is deposits from A to Z (don’t worry, there aren’t actually 26 points):

Brokerage policies

Some brokerages have adopted polices requiring deposits to be in certified funds. It is important to remember that despite what a brokerage policy is, the buyers and sellers get to determine in the purchase contract how the deposit should be provided.

If a brokerage has a deposit policy, it is important for its associates to communicate that fact to the parties. Some best practices with respect to deposits include:

1. Members should ensure the purchase contract specifies the form in which each deposit must be received and the date by which it must be received.
2. When contracts are sent electronically and are not accompanied by an initial deposit, please ensure the contract specifies when and how the initial deposit will be provided.
3. Members should immediately contact their client(s) in writing to notify them if a deposit is not received and to seek instructions in writing.

If a deposit is not received by the due date, the standard contract specifies that the seller(s) get to decide how to proceed. Their options include:

• Terminating the agreement.
• Proceeding to accept the deposit after the time specified.
• Bringing an action against the buyer(s) for breach of contract.

If the seller(s) decide to proceed with the transaction and accept the late deposit, CREB^® has a Late Deposit to Trust form (via webforms) that you can use to document the transaction and the consent of the seller(s) and buyer(s).

You must always advise your clients of your individual brokerage’s policies with respect to deposits, as well as the fact that if a transaction falls through, there may be delays with providing a refund of the deposit. This is especially true if the funds are provided by personal cheque, since it is prudent to wait until the deposit cheque clears before issuing a refund.

Forfeited deposits

Make sure sellers are aware of how the disposition of a buyer’s forfeited deposit will be disbursed. Some sellers are surprised to learn they will not be receiving the entire deposit amount, as the listing brokerage is entitled to compensation as outlined in the listing agreement.

Key takeaways leading up to an offer

• Know your brokerage policies and procedures about deposits.
• Tell your clients about the brokerage policies regarding deposits at the time of listing. If your clients disagree with the policy, speak to your broker to learn what options may exist to assist with the client’s request.
  • NOTE: If your sellers agree to the brokerage policy on deposits and agree to abide by that policy for the sale of their property, the form in which the deposit is to be provided is part of the seller’s instructions.
• Inform any potential purchasers of the seller’s instructions regarding the form the deposit must come in.
• Review the purchase contract to ensure the deposit section has specified the necessary details and make agreed upon adjustments to the offer before acceptance if necessary.

Support your clients to act in good faith

Remind the buyer they must act in good faith with respect to every contract they sign and that you assist them with. Real Estate Magazine published an article about a concerning trend involving buyers offering on multiple properties to give them more time to decide which one they really want.

There is risk to the agent in participating in this type of behaviour, says Dave de la Ronde from the Real Estate Insurance Exchange (REIX). Knowing that the buyer isn’t intending to act in good faith – or even worse, promoting this tactic – opens the agent to liability if a seller decides to pursue damages resulting from an undelivered deposit (claiming their REALTOR^® told them it was OK). Members may not have errors and omissions coverage if this happens.

Acting in good faith also extends to the buyer performing the contract. Buyers who choose not to waive conditions, such as financing, for reasons other than a legitimate inability to get a mortgage can also put the buyer’s deposit at risk. If the seller challenges the buyer through legal action to prove they couldn’t get financing, it’s incumbent on the buyer to be able to provide proof to avoid the claim of failing to act in good faith. It’s also the responsibility of the buyer’s agent to advise them that not waiving conditions needs to have a legitimate basis.

As a buyer’s agent, you must not suggest to a buyer that they can use conditions as an escape route from the contract if they get cold feet. Remember, not every instruction from a client is lawful. A client requesting that their agent participates in intentionally breaching one or more purchase contracts is something members must avoid.

Troubleshooting deposit issues

Periodically a deposit comes in a form that isn’t specified in the contract or isn’t in alignment with the brokerage policy.

The form of the deposit is a term in the contract. If a party hasn’t performed the contract, it could turn into a bigger issue. It’s best to bring this to the attention of the seller and get instructions on how to proceed.

If a buyer has paid a deposit in accordance with the agreed purchase contract, but it wasn’t in accordance with the brokerage policy, speak to your broker to understand your options. You may need to make an amendment to the purchase contact and get the appropriate form of deposit, if that’s agreeable to all parties involved.

If you want more information about why deposit due dates matter and what to do if a deposit isn’t delivered on time, visit our Member Practice FAQs. 

If you have any additional questions about deposits, please email CREB® Member Practice at crebmp@creb.ca.