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This guide explains what a deposit is, why it matters, how much you can expect to pay, and the rules that govern it across Canada.
Defining a Real Estate Deposit
A real estate deposit is a good-faith payment made by the buyer to show they are serious about purchasing the property. It is not an extra fee because it becomes part of the buyer’s down payment and is credited toward the total purchase price on closing.
The deposit must be delivered once an Agreement of Purchase and Sale (APS) has been accepted, often within 24 hours, though the exact timing depends on provincial practice and contract terms.
Purpose of a Deposit
The deposit serves several key functions:
- Demonstrates commitment: It reassures the seller that the buyer intends to move forward with the purchase.
- Protects the seller: If the buyer backs out after removing conditions, the seller may be entitled to keep the deposit.
- Secures the agreement: It formalizes the offer and signals the seriousness of negotiations.
- Forms part of the purchase funds: At closing, the deposit reduces the remaining amount the buyer must bring in the form of a down payment or mortgage financing.
Where the Deposit Is Held
Deposits are not given directly to the seller. Instead, they must be held in trust:
- Usually by the listing brokerage, in a regulated trust account.
- In some cases, by a lawyer or notary, depending on the province.
- These accounts are tightly monitored by real estate regulators to protect consumer funds.
Before you finalize funds in trust, estimate land transfer tax, legal fees, and prepaid adjustments with our closing cost calculator.
Refundability and Risks
Whether a deposit is refundable depends on the status of conditions in the purchase agreement:
- Before conditions are waived: If financing, inspection, or other conditions are not met and the buyer legally withdraws, the deposit is returned in full.
- After conditions are waived/fulfilled: If the buyer fails to close, the seller may keep the deposit and may also seek damages if losses exceed the deposit amount.
- Disputes: If both sides claim the deposit, it remains in trust until resolved by mutual release or a court decision.
Deposits vs. Down Payments
It’s important to distinguish between a deposit and a down payment:
- The deposit is paid upfront with the offer and held in trust.
- The down payment is the total amount a buyer contributes toward the purchase price at closing (minimum 5% in Canada, subject to mortgage rules).
- The deposit is credited toward the down payment at closing.
Example: On a $600,000 home with a 10% down payment ($60,000), if you’ve already provided a $20,000 deposit, you’ll only need to bring $40,000 at closing (plus closing costs i.e. legal fees, land transfer tax).
It’s important to distinguish between a deposit and a down payment. The deposit is paid upfront with the offer and held in trust, while the down payment is the total amount you contribute at closing. For a detailed breakdown of how the two differ in timing, purpose, and minimum requirements, see our full guide on Deposit vs Down Payment in Canada.
Real Estate Deposits in Canada
Province-by-province look at typical deposit ranges, common practices, and the regulator overseeing trust accounts. Values are indicative and vary by market conditions and contract terms.
Ontario
2%–5%British Columbia
$10K–$50K / ~5%Alberta
$5K–$10K / ~2%Quebec
~1%–5%Atlantic Canada
2%–5%Key Takeaways for Buyers
- Expect to pay a deposit quickly after your offer is accepted.
- Know that it will be applied to your final purchase price.
- Ensure your Agreement of Purchase and Sale clearly outlines when and how the deposit is due, and under what conditions it is refundable.
- Always obtain advice from your real estate lawyer before signing.