#GoodReads – What happens to the deposit when a deal fails?

#GoodReads – What happens to the deposit when a deal fails?

Via @RECO

“What happens to a deposit when the buyer doesn’t close on the transaction?

Not being able to complete a home closing is a disappointing situation for both parties involved in a transaction, and it has consequences. When a transaction fails to close, the seller may have to put their property back on the market or delay the purchase of their next home, while the buyer may have to temporarily arrange for alternate accommodations if they have already sold their previous residence.

Unfortunately, real estate deals do sometimes fall through for a variety of reasons, including not being able to sell a previous home or secure a mortgage – something we see more when the economy slows down.

This brings us to the deposit, which refers to the money a buyer submits during the offer process as a show of good faith and to demonstrate they have the financial means to make the purchase.

If the buyer is working with a real estate agent, the deposit comes with some added protection. All agents participate in an insurance program, administered by the Real Estate Council of Ontario (RECO), which includes consumer deposit coverage.

When a deposit is given to a real estate brokerage in trust, the brokerage has certain legal responsibilities:

• • They must deposit the money within five days and maintain it in a designated trust account at a recognized financial institution.
  • They can only release the funds in accordance with the terms of the trust.

When a buyer is unable to complete the transaction, the deposit is not automatically released back to them, nor is it automatically given to the seller. Both the buyer and seller must agree in writing before the funds are released.

If the reason for the transaction not closing is a dispute between the parties and there is no agreement on what should happen with the deposit, the funds will be held by the brokerage until the matter is resolved by the parties or through court proceedings…”

To read the full article, click here.