Question:
A property sells for $750,000.00 and the Buyer’s agent brings a deposit for $750,000.00 with the balance of the purchase price paid on closing.
Are there any implications here, or is this all right?
Answer:
On the issue of the deposit, there really isn’t one. That’s a problem. In fact the full purchase price has been paid upfront and is misdescribed in the Agreement as a “deposit”.
Deposits are forfeited for breach of contract or non-completion. Deposits cannot be a penalty. A deposit of 100% would be a penalty. A deposit of up to 20% is usually allowed. Deposits over twenty percent deposits are “at risk”.
This particular transaction calls for a deposit, so you need to have:
1) a lower, specified deposit, and
2) a further payment being the balance of the purchase price held in trust, but essentially returnable, but not forfeited.
Brian Madigan LL.B., Broker