One of the little speeches we always give our buyers is who to make the deposit cheque out to (answer: the Listing Brokerage). Not us, not our brokerage, not the seller directly.

We will even go so far as to text you the name to go on the deposit cheque so you have it at your fingertips when standing in line at the bank. We will go with you to get the cheque if you want, and we personally deliver it to the Listing Brokerage to ensure it gets into the right hands.

It can be nerve-wracking to hand over a cheque for thousands of dollars for a home that you aren’t going to get the keys to for likely weeks or months. We get asked, where does it go and is it safe? Let’s take a look:

The Agreement of Purchase and Sale states that the deposit is to be placed in the Real Estate Brokerage’s non-interest bearing Trust Account. Why? Because, though some won’t believe it, trading in real estate is a regulated business under the Real Estate and Business Brokers Act 2002. This Act protects you by dictating where your deposit is held. Critical stuff in the event that say a brokerage suddenly goes bankrupt. I can hear your sigh of relief from here.

But, there’s more. While many people know that the deposit is safely held in a trust account, what many people don’t know is that only the first $100,000 of your deposit is safe. After that, the rest isn’t insured. We rarely see deposits of this size, but they are not unheard of, especially in commercial transactions. One solution here is to split the deposit up between the trust accounts at the Listing Agent’s Brokerage and the Buyer Agent’s Brokerage. Or a portion of it could be put in a lawyer’s trust account.

The deposit is credited towards your down payment for the purchase, it’s not additional money that you are paying. However, since the seller pays the commissions owing from the deal, the deposit amount held in the Brokerage’s trust account is often used to pay those agents once the transaction has closed. Any remaining amount goes back to the seller. Easy Peazy.

One final note: something commonly heard of is scams with the first and last month’s rent given by a tenant to secure an apartment. The prospective tenant gives their deposit and then the landlord disappears. When your rental is done through a Realtor your rental deposit is held in the same trust account and only released once you get the keys.