Dear David,

We’ve been out to see a few houses and noticed that deposits have changed a lot since the last time we bought a home. A dozen years ago, deposits were around $4 to $5 thousand. Now we are seeing deposits of $20 thousand, or in some cases as much as $50 thousand. We don’t have that much cash sitting around in our bank account, can we submit an offer with a lower deposit? – SURPRISED

DEAR SURPRISED: Deposits are one of those things that can feel substantially different from one market to the next. There is no standard deposit amount in a real estate transaction, and expectations tend to vary according to region. In a market like Toronto, where prices are higher and competition can be intense, deposits tend to be larger. In a smaller or less-expensive market like Windsor, deposit expectations may be lower. Waterloo Region falls somewhere in the middle depending on the property, the price point, and the level of interest in a home.

Deposits are commonly geared to the price of the property. A $5 thousand deposit may have felt normal when homes were selling for less, but as prices have risen, so have the deposits that sellers expect. On a higher-priced property, a larger deposit may be requested to show the buyer is financially equipped to buy and serious about completing the transaction.

Not every buyer has tens of thousands in cash sitting in their bank account, so before you start making offers, it’s important to prepare financially. Know where your deposit funds will come from, how quickly they can be accessed, and whether money will need to be moved from savings, investments, or another account. Most deposits are due upon acceptance of an offer or within 24 hours of acceptance, so timing matters.

A strong deposit can inspire confidence. It tells the seller that the buyer is committed and likely has their finances in order. By comparison, a low deposit can raise questions. Even when your offer price is acceptable, a lower deposit may leave the seller wondering if you are fully prepared to close the deal. In a competitive situation, a lower deposit could cost you the win.

PRO TIP: Many people do not realize that a deposit is technically not required to bind a real estate agreement, and that a properly executed Agreement of Purchase and Sale can create a binding contract even without a deposit. But in practical terms, most sellers expect a deposit, and its size can influence how your offer is received. 

You can submit an offer with a lower deposit, but whether or not it will be accepted depends on the property, the seller, and the overall strength of your offer. Your Realtor should be prepared to explain why your deposit is low, and structure your offer in a way that gives the seller as much confidence as possible. The safest approach is to plan ahead: speak with your lender, review your available cash, and make sure you know exactly how much deposit you can provide before you find the home you want. In real estate, confidence matters, and a well-prepared buyer often has the upper hand. #Advice #AskDavid #TheNegotiator