What happens to the deposit if the buyer bails?

Wednesday Mar 08th, 2023



What happens to the deposit if the buyer bails?

Did your buyer notify you just a few weeks before the closing date that they won’t be closing on the purchase of your property anymore?  Not to worry!  I’m Meegan Dennie, a real estate agent in Toronto Ontario Canada and in this video, I’ll walk you through a couple of scenarios that can help you handle that. 


You are selling a property and you have an accepted agreement and sale.  You are supposed to close in a few weeks but you were just notified that the buyer can’t close on closing day…DUN DUN DUUUUUUNNNN.  

Believe it or not, this happens more than you’d think and this is not a great situation to be in.  But it’s an even worse situation for the buyer that is backing out of the deal.   So you are at least on the better end of this.

There is now a breach of a legal binding document of Thousands and or even Millions of dollars and lawyers will need to get involved asap.  

The deposit that was given to secure the agreement of the purchase and sale is not just given back to the buyer and you have to start all over again from scratch.  There are many different ways to approach this, all in which you should seek legal council for guidance right away.

Usually this is where you go back to negotiations but not necessarily on the price of the house, but in regards to your losses for the buyer backing out. 

#1 example, You can negotiate for you to keep all or some of the deposit and everyone signs off on a mutual release and you move on and relist and try to sell the home again. 

That’s not terrible, especially if the deposit is $80,000 as an example.  

Ok so, #2 example - You agree to nothing but get the house back on MLS asap and find a real estate litigation lawyer, if your current real estate lawyer is not one already.  In this example, the deposit is held in your listing agents brokerage’s Trust account and it will stay there until they are given notice by your lawyer to release those funds.   

The difference between example 1 and 2 is that in example 1, you get access to that deposit money pretty quickly and move on.  But in example 2, you are planning to sue the buyer which is not so quick of a resolution. 

Let’s say the market has dropped or maybe interest rates have increased or you sold the house in spring and now it;s going up in December and January.   Basically, something in the market has changed and will negatively impact your next sale price.  Your house months later, is now worth 100k less than the original agreement.  If you choose example 1, that deposit hardly makes up for your losses.  In example 2, you can sue to recoup that 100k price decrease plus possibly keep that deposit among other losses that a judge may find is fair. 

However, in example 2, you don’t get anything quickly and could take awhile to settle. And, if the market hasnt changed all that much or works in your favour, like prices going up, than you may be better off negotiating in example 1 and walking away.

This is why I say, consult with legal council.  But there are many previous case law’s that have examples just like these and the buyer will be forfeiting something.  How much is the question?

In any case, the goal is to get your house sold as quickly as possible, again!

I’m Meegan Dennie, Don’t hesitate to call me for anything real estate related In Toronto or the GTA. 



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