What Happens to the Buyer's Deposit When Selling a House in Ontario?

The buyer's deposit is normally held by the brokerage, not by you. How the deposit is handled at closing depends on your situation, so confirm it with a lawyer. If the sale fails, what happens depends on who is at fault and on whether you lose money on a resale.

If you and the buyer disagree about the deposit, the brokerage can pay it out only under a mutual consent or release signed by both sides, or under a court order. If a brokerage has held a disputed deposit for two years with no determination, it is transferred to RECO, which holds it in trust. RECO's consumer deposit insurance covers up to $200,000 per claim and up to $4 million for all claims arising from a single event.

When a buyer fails to close, your damages are measured as the difference between the agreed price and the price on the later resale. If you have a resale loss, the forfeited deposit is treated as part payment of the damages and is deducted from the award. You cannot recover losses you could reasonably have avoided, but you are not required to accept a lower offer from the buyer who defaulted. Outcomes turn on the facts, so get advice early.