Question:
We recently worked with a REALTOR® on the purchase of our first home. The entire experience was very pleasant and we are very happy with the home we will be moving into. When we wrote up the contract to purchase Ken, our REALTOR®, asked us how much we were going to put down as a good faith deposit. We did not know what he meant so he told us that a deposit is held until possession day of “X” amount of dollars by his brokerage at which time it forms part of the purchase price. Our questions are what is this money used for, and what would happen if we did not have the deposit money?

Fred & Ethel

Answer:
Dear Fred & Ethel In answer to your first question the up front costs on the purchase of a new home are:

• The good faith deposit. This is a sum of money agreed on by both parties that ensure that the contract will be executed in a timely manner. The deposit is held by the Buyer’s Brokerage and it forms part of the offer to purchase price on possession day. In contract law “good faith” in the execution of a contract is required by the province of Saskatchewan. The most common way to show good faith is by promising an amount of funds to be held in trust until completion of the contract. The customary amount of “good faith” varies from each jurisdiction in the province so it is advisable to seek out this information with your REALTOR® before writing an offer.
• Legal fees
• Any documents required by the lawyer or lending institution (surveyor certificate/title insurance)
• Any inspections fees you may have
• Deposit amount to the bank for securing a mortgage
• Property taxes from the date of possession until the end of the year
• Any utility hook-ups or transfer fees

So Fred & Ethel, as you see its not just arranging the mortgage, but it is a series of costs that must be paid prior to possession.

As to your second question regarding not having the funds available for the “good faith” deposit, this would be at the judgment of the seller. A seller is holding their property off the market while the buyer fulfills their conditions prior to finalization of the contract. The “good Faith” gives the seller the security that conditions are being met in a timely manner. If you agree to a “good faith” clause and do not have the required funds the seller can withdraw from the contract if they feel you cannot fulfill your obligations. I would think that the seller would not continue the transaction if the deposit is not made. I hope this gives you both a better idea regarding the “good faith” deposit.

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c/o Moose Jaw Real Estate Board
79 Hochelaga St. W.
Moose Jaw, SK
S6H 2E9