Advocating for Bigger Deposits

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Key Takeaway
If the buyer fails to close the transaction, the seller is entitled to keep the deposit, without the need to prove damages.

When negotiating an Agreement of Purchase and Sale, some agents treat the deposit as if it doesn't really matter.

But in some cases, it matters a lot.

Instead of choosing a random deposit number on your MLS listing, you should be advocating for a higher amount - when your representing the seller, of course.

So why Bigger Deposits?

Because if the buyer defaults, the seller is entitled to keep it... without proof of damages.

This means that even if the seller ends up reselling the property for a higher price and suffers no damages at all, they are legally entitled to the deposit.

This is contrary to general contract law rules where the injured party is only entitled to be compensated for damages that they can prove.

But breach of contract in real estate deals is treated differently.

There is an Ontario Court of Appeal decision that confirms the rule:

[45] It is well-established by case law that when a purchaser repudiates the agreement and fails to close the transaction, the deposit is forfeited, without proof of any damage suffered by the vendor...

So in situations where the seller has some leverage - like extensive buyer conditions, or multiple offers - prove your value to your client and negotiate that deposit up.

It will minimize the risk of buyer default and, should the unforeseen happen, it compensates the seller without needing to prove damages.

Plus your clients will love you for doing so.

Written by
Zachary Soccio-Marandola
Real Estate Lawyer

Direct: (647) 797-6881

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