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A deposit is the sum of money a buyer submits with a signed purchase offer to show good faith, held in a real estate brokerage’s or lawyer’s/notary’s trust account until closing, when it is applied toward the purchase price and down payment.
The deposit is paid when the offer is accepted, as part of the Agreement of Purchase and Sale — it is not paid to the seller directly but held in trust under provincial real estate and law society rules until the deal closes or is legally terminated. The down payment, by contrast, is the portion of the purchase price paid at closing that isn’t financed by the mortgage, sized against lender and insurer minimums rather than negotiated between the parties.
There is no federal or provincial rule setting how large a deposit must be — it is negotiated between buyer and seller, and customary amounts vary by local market. If a deal falls through without a valid contractual condition protecting the buyer, the deposit can be at risk of forfeiture, which is why financing and inspection conditions matter.
On closing day, the deposit is subtracted from the balance the buyer still owes and appears as a credit on the statement of adjustments, alongside other closing costs.
Held in trust, not paid to the seller: deposit funds sit in the listing brokerage’s or lawyer’s/notary’s trust account under provincial trust rules until the deal closes or is terminated.
Not a regulator-set minimum: unlike the down payment, there’s no federal or provincial rule fixing deposit size — it’s negotiated between buyer and seller.
Credited at closing: the deposit reduces the balance owed on closing day and is shown as a credit to the buyer on the statement of adjustments.
Quebec uses different terminology: under Quebec’s civil law system the offer is a promesse d’achat, and deposit funds are typically held by the notary rather than a real estate brokerage.
Definitions reflect Canadian federal and provincial rules as of the “Updated” date above. Not advice for any specific file.
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