Buying Collingwood real estate can be a complicated process, particularly for first-time buyers. There are many aspects of the process which cause confusion, and a prime example of this is the matter of the buyer’s deposit. This deposit sometimes also called “earnest money,” is a necessary part of the process. Failure to pay could potentially even break the purchase agreement, or leave the would-be buyer open to legal action.
Here’s what you need to know about your real estate purchase deposit.
A Collingwood Real Estate Expert Explains Earnest Money Deposits
- What is the deposit?
Fundamentally, the purpose of the deposit is to demonstrate good faith on the part of the buyer – which is why it’s also called “earnest money.” It shows that the buyer does have cash-on-hand, and is willing to put it up as proof that they are legitimately interested in completing the sale.
Also, this deposit does not go directly to the seller. It is actually held in trust by the real estate Brokerage and is only applied to the sale once the transaction is completed (on closing).
- How much is the deposit?
In a broad sense, the deposit can be almost any amount the buyer wants to offer – even as much as the entire down payment. The size of the deposit is generally considered to indicate the buyer’s purchasing power, as well as how serious they are about the purchase.
In situations where a seller is looking at multiple offers for roughly the same amount of money, the buyer offering to put up the biggest deposit will often have an advantage over the other offers.
- Is a deposit required for a home sale?
Strictly speaking, no. If a buyer wants to draft a purchase agreement that omits any deposit, they are free to do so. Likewise, the seller is also free to accept that offer. However, chances are very low that a seller would actually do this.
- Does failure to pay the offered deposit break the purchase agreement?
Some buyers get cold feet and think that if they don’t pay the deposit, that gets them out of the offered purchase agreement. Most of the time, this isn’t the case. Failure to pay would usually be seen as a breach of contract.
Do you have more questions about Collingwood real estate? Licensed Broker Keith Hull is here to help! Just contact our office.