Part 11 – Q& A Series
Q: How much should I put down as a deposit in order to be taken seriously by the sellers?
– Candace F.
A: Hi Candace,
The amount you should put down as a deposit will differ depending on a few factors. First, the biggest factor is your home market. Some require a very large amount whereas others require very little. Second, the higher the purchase price the higher the expected deposit. Another factor that can increase the expected amount for a deposit is in the case of a multiple offer situation. The prospective buyer may increase their deposit (and also bring to the negotiations a certified cheque) to prove their reliability.
The GTA – Deposit Expectations
Ask this question to another realtor and you will get a different answer. Some will insist on receiving 5% of the purchase price. Others, like myself, are a bit more lenient. I normally advise my buyer clients to offer about 2.5% of the purchase price as a deposit. To this date, I haven’t had anyone refuse or kick up a big fuss over it. So, for a $400,000 purchase price, that’s a deposit of $10,000.
What happens to the deposit?
The deposit, which in almost every instance will be required to be in the form of a bank draft or certified cheque, will be held in the listing brokerage’s trust account. The deposit will remain there until closing but can be used as part of your overall downpayment amount.
Budgeting for Closing Costs
Before you purchase a home, you’re going to have to show your lender proof that you have the downpayment readily available. In most cases, it cannot simply be gifted to you right before closing. Therefore, if you do have the minimum 5% downpayment available (that’s $20,000 on a $400,000 purchase) then you should have no issue producing the 2.5% deposit amount as well. That still leaves you plenty of room for closing costs (which you should be budgeting for ON TOP OF your downpayment amount) and shows the prospective seller that your offer should be taken seriously.
As always, if you have a question or comment leave one below. Or you contact me directly! Happy hunting!
Image: David Goehring