Pro-rata Division of Deposit Funds
The limit for a deposit to qualify for 100% coverage is $200,000.00. So, if your deposit exceeds that amount consider other alternatives.
The overall limit from RECO’s perspective is a $4 million payout to everyone involed a Brokerage failure, and that’s it.
Let’s make a few assumptions:
The Brokerage:
- Has 2,400 agents
- Has 17 offices
- Holds many deposits
- Steals $11 million
With that type of operation how much money might they hold?
Assume 10% of the agents have sold listings. That’s 240 deals. The average sale price is $1 million in the GTA. With a 5% deposit of $50,000.00 per deal, that would be $12 million. But, they already stole $11 million, so that leaves $1 million to be thrown into the pot.
RECO has an extra $4 million which it will contribute, bringing it up to $5 million to be shared.
The RECO payout will amount to 5/12ths of the amount due per deal. So, that’s $20,833.33 per outstanding transaction.
It was foolhardy in the first place to have left such funds with a Brokerage like that. The caution should have been to move it elsewhere for better protection in the first place.
Could it be any worse? Sure, the Brokerage could have stolen the extra million, and the clients would even get less money.
Although, this theft doesn’t take place that often, when it does, the coverage is not that great. Consider other options!
Brian Madigan LL.B., Broker