You have to clearly understand how deposits work.
They are a `sign of good faith and commitment to the deal`.
When your write a PURCHASE OFFER` it is just that an offer. It is NOT a contract. To show you are serious, you attach a deposit cheque. Which is not to be cashed until the offer is accepted by both parties.
Once the purchase offer is accepted by both parties it becomes a PURCHASE CONTRACT often with conditions attached.
At this point the deposit cheque will be cashed and deposited in the trust account of the Seller`s Real Estate Brokerage. I had clients who want to put the deposit at the lawyer`s trust account or at their, the Buyer`s Real Estate Brokerage. Neither is considered acceptable by Alberta`s Realtors. I tried and the deal is likely rejected by the seller.
Trust accounts follow legal rules that protect the depositor. Any incorrect use of deposit money is a criminal offense that can land the offender in jail. So really in the end, it doesn`t matter where it is deposited and by convention, in Alberta, it is with the Seller`s Realtor`s brokerage.
Once the conditions of the PURCHASE CONTRACT are waived it becomes an UNCONDITIONAL CONTRACT. Often a 2nd deposit is made at this point which is called the `Additional Deposit`. Now there is no going back! If you waived as a buyer the financing conditions without having a signed mortgage commitment letter from your lender, you are on the hook for purchasing the property with or without a mortgage. So only waive when certain that your financing is in place. A mortgage-broker`s pre-qualification is not a mortgage commitment!!!!!
As to the amount of deposit. Realtors like the intial plus additional deposit to add up and equal the total commission. That way isf the purchase contract is breached THEY are covered. Their job is to get you a signed purchase offer on a property that you want to sell or buy. That is what their commission is for. They are NOT responsible for either party breaking the purchase contract.
If the buyer does not waive the conditions and thus terminates the accepted purchase contract, he/she will get the deposit refunded. Once the purchase contract is breached by the seller, then the seller is liable for damage incurred by the buyer plus refund of the deposit (the seller owes the commission to both Realtors). Damage can be a lot more than the deposit.
If a buyer breaches the unconditional contract, the buyer is out of his/her deposit which will first go towards the commissions of the Realtors (who did their jobs after all) and what remains goes to the seller. The buyer can be held liable for any damage that the seller has incurred due to the breach. This damage can be a lot more than the deposit amount. Just think of what would happen if the seller had scheduled the purchase of another property and moving to that new property?
As to how much the deposit should be? From the buyer`s perspective it should be as little as possible. From the seller`s it should be as much as possible. Typically, on a $200,000 condo, I put an initial deposit of $2000 and an additional of $3000. That is less than the Real Estate commissions, but that is the Realtor`s problem not the buyer`s.
