Deposits for Vancouver Real Estate Transactions for First Time Buyers!
In Episode 8 of the First Time Home Buyers guide we discussed Price on the Contract of Purchase and Sale. Now we’re going to talk about the Deposit.
A good faith Deposit is almost always offered (But not paid immediately!) when a Buyer submits an offer or Contract of Purchase and Sale to buy a residential property in Vancouver.
This deposit money in the form of a bank draft or wire transfer (Cash, certified or personal cheques are NOT acceptable) is deposited and held to ensure the Buyer will go forward with the deal on the Completion Date and committed to the sale when the Buyer removes their subject subject conditions from the offer. This deposit money forms part of and is included in the purchase price.
On page 1 of 7 Section 2 on the sample offer or Contract of Purchase and Sale (see below) beneath Section 1 Price, you will find the amount of the deposit and the details on how and when it will be paid and held.
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In most cases the deposit is NOT PAID upon acceptance of the offer!
The Deposit is usually paid 7 days after acceptance of the offer, once the buyer is completely satisfied with the property and removes their subject conditions (making the contract legally binding) which in the example below would be July 7, 2010.
With our sample offer, Mary Purchaser offers a $20,000 deposit payable within 24 hours of subject removal, ie when the Buyer is 100% satisfied and decides they want to go forward with the deal on the Completion Date.
How Much is the Standard Deposit Amount in the Vancouver Real Estate Market?
The standard deposit amount in the Vancouver Real Estate market is 5% of the initial asking price. That said, the Buyer can propose any deposit amount as well as when that deposit is paid depending on the circumstances.
How is a Real Estate Deposit Paid in Vancouver?
The deposit has to be in the form of a certified cheque or bank draft (No Personal Cheques or Cash!) made out to the Buyers Agents office followed with the words “In Trust”. So if I am representing the Buyers, the Buyers deposit cheque will be made out to “Century 21 In Town Realty In Trust”.
Can a Buyer Lose Their Deposit?
If the Buyer removes their subjects and the Buyer does not Complete the transaction on the Completion Date or move forward with the deal, there may be a chance the Seller could keep the Buyers deposit (confirm this with a lawyer).
Who Holds the Buyers Deposit and is it Safe?
The deposit money is held by the Buyers Agents Real Estate office in their Trust Account were this money can only be released under three circumstances:
- The Contract of Purchase and Sale Completes (ie the deal goes through) at the Land Titles Office and the property in question is sold to the Buyer. The deposit money held in the Trust Account will be released to the Seller along with the rest of the purchase price.
- The Contract of Purchase and Sale does NOT complete (ie the deal does not go through) due to the fault of the Seller and the Buyer may be able to get their deposit back (confirm this with a lawyer).
- If there is a legal dispute that goes to Court between Buyer and Seller the Deposit can be paid into Court.
The deposit money is held in the Trust Account at the Buyers Agents Office even if the Buyers Agents office shuts down, goes bankrupt, or in any way ceases to exist or do business as per BC Government Regulations.
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Check out the Next Episode First Time Home Buyers Guide 10 – Completion, Adjustment, and Possession Dates with Video!
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