What Happens When The Buyer Doesn’t Deliver The Deposit?


8 minute read

July 19, 2021

Do you know how many transactions I’ve been involved in, through my entire career, that did not close?


Exactly one.

The property was sold in January of 2020, firm.  Deposit delivered and held in my brokerage’s trust account.

About three or four days before the scheduled closing in February, the buyer’s agent said that the buyer wanted to push back closing, then said he wanted an inspection, then started threatening not to close.

Don’t worry, right?  All deals close!

Well, this one didn’t!  The buyer is living in the United States, seems to be independently wealthy, and simply refused to close.  Here we are, seventeen months later, and the deposit is still being held in trust, pending litigation.

How many deals have I been involved with, throughout my whole career, that didn’t close on the scheduled completion date, but closed a day or two later?  Maybe five or six.  It’s not common, but it happens.

How many times in my career have I sold a property, firm, and the buyer didn’t show up with the deposit cheque?

I’ll tell ya, I spent the last couple of weeks thinking about that!

I swear, it must have happened before at least once or twice, but I can’t actually remember an instance.  And I have a very good memory!

Recently, I had a listing for one of the lowest-priced properties in the city.  There are a handful of condominiums where prices are depressed, and some of these, in my honest opinion, represent excellent value in the medium-term.  A building with a stigma will eventually lose that stigma, especially when any and all financial or legal issues are well beyond them.  But save that for another day…

I ended up with six offers on the property on our scheduled “offer afternoon,” (notice I didn’t say “offer night” because I prefer to do offers at 3pm nowadays – also a topic for another day), and they ranged anywhere from just above the list price to about 13% over.

I had an offer that was well out in front but it was conditional.

You know how this goes, right?

If you’ve got six offers, you want a firm one.  You don’t want to accept a conditional offer, tie up the property and tie into that one buyer and one agent, and then wait for them to decide whether or not to go through with the transaction.  You want to hold the cards; you want the leverage!  It’s a seller’s market!  Conditional offers be damned.

I had two somewhat competitive offers that were unconditional, so I asked both of them if they would improve.

One didn’t.

The other did.

And that other offer just came up and beat the price of the conditional offer, so we accepted.

The shame of it is: I really liked the agent who brought me that conditional offer.  I had been talking to her all week, I’d given her the status certificate for review, she’d asked all the necessary questions about the building’s history, and we had great rapport.  I really, truly would have loved to work with her.  But my seller and I just couldn’t risk accepting a conditional offer.

The agent with the unconditional, now, highest offer, was somebody I had never heard from before.  Never heard of before either.  That’s very common in this industry now where there are, I believe, 60,000 real estate agents.  But it sure is nice working with agents you know and trust, now and again.

I asked this agent, “Can you bring me a deposit cheque tonight?”

Only one of the six offers submitted had an accompanying deposit cheque, and that was for the offer just above the list price, with two conditions, submitted at 6pm when offers were at 3pm.  Don’t get me started.  This too is a topic for another day, but in case you’re curious, upon receiving that offer, I simply emailed back, “Offers were today at 3pm.”  The property had sold two hours ago, what more was there to say?

So none of these offers presented at 3pm had accompanying deposit cheques, which sounds strange to any of you who have purchased a house this year in competition, since you all ran to the bank to get bank drafts and sent photos of them to your agents.

This is how it usually works.

But when you’re dealing with the lowest-rung on the real estate ladder, the buyers and the agents aren’t that savvy.

“I can try my best,” was what the agent replied when I asked him if he could bring me a deposit that night.

I couldn’t force him to.  And I couldn’t let all the offers expire until somebody magically showed up with a bank draft.

We accepted the offer, and that was that.

The agent emailed me a few hours later and said, “Can you please send over your bank wire transfer info?  They couldn’t get to the bank before closing but it’s easier for them to send a wire.”

This was a good sign.  While I wasn’t going to get the deposit that night (legally the buyer has 24 hours), they’d made arrangements for a wire payment.

The next morning, the agent called me.  I assumed he was calling to say, “The wire has been sent.”

Instead, he said, “David, what can you tell me about this building?”

Not a great question.  Not only because it was so vague and so misplaced, but because I knew exactly where this conversation was going.

“Jimmy,” I said, and we’ll just pretend his name was Jimmy, “Have the buyers sent the wire transfer yet?”

There’s no point in beating around the bush.  I knew what was happening, and while he didn’t, I wanted to get this out of the way.

“Um, not yet,” he said, “They’re going to.  They just have a few questions about the building.”

I was happy to answer his questions, but first I needed to explain, “Jimmy, these questions should have been asked, answered, and analyzed last week, or yesterday, but most certainly NOT after your clients have purchased the property, FIRM.”

“I know, I know,” he said, “But their friends are saying they should be concerned, and that there are bad things on the internet,” he went on, and on.

So I put my kid gloves on and I walked him through the entire history of the building, right up to today, with an honest, common-sense explanation of where the condo corporation and its finances stood.  Then, I told him that I had sold nine of these units in the past six weeks, and reminded him that we had six offers on the condo when he won a proverbial bidding war, so the building was certainly in demand.

I felt it prudent to warn him in advance, “Jimmy, just remember that your clients bought this property, firm.  They have no legal way to get out of this transaction.  If they don’t bring the deposit, they could be sued.”

He told me not to worry and that the buyers just needed to spin their wheels, and he would get them onside, and deliver the deposit within the hour.

About two hours later, I got an email with the subject line, “MUTUAL RELEASE.”

The body of the email:

Hi David,

Please see the attached mutual release. My client changed their mind due to the Google reviews. I tried my best. Thank you so much for your support to get this deal.  Hope you will understand the buyer’s point of view.

One of my favourite lines in Pulp Fiction after Marcellus Wallace is asked if he’s okay:  “I’m pretty fucking far from okay.”

Yeah.  I’m pretty far from “understanding the buyer’s point of view.”

In fact, I don’t understand, don’t know, don’t care, don’t know you’d even make such an insane suggestion, and want to pick the buyers up and dangle them by their feet off the end of the dock.

As I’ll explain shortly, this didn’t really matter.  It would ultimately have no effect on my ability to work for my client to his satisfaction, but it bothered me to no end because of the arrogance, entitlement, and naivety of the buyer.

Some of you will be lined up to suggest that the buyer agent didn’t explain the seriousness of making an unconditional offer, or the consequences of walking away, but I don’t think it’s that.  The agent told me, “These are really young buyers, you know, they’re just kids.”  So yeah, I’ll show my age-40 self now and say, “Damn, kids today.”

This isn’t to suggest that some rich 62-year-old man wouldn’t do the same thing and say, “I have a great lawyer, screw off, sue me.”  But in my situation, I just know that the buyers’ life-inexperience had something to do with this.  It’s like driving drunk, hitting a pole, and then asking for a do-over.

Consequences, dammit.

Only, I wish there were some in this case.

I don’t want to spoil the ending to my story here, but let’s ask the question from the title of today’s blog post:

What happens when the buyer doesn’t deliver the deposit?


In this case, nothing.

In many cases, something.

But while television and movies, specifically those produced in and revolving around the United States, which is one of the most litigious countries on the planet, may teach us that people sue each other all the time, it’s not always that easy.

Let’s say I sold a property for $1,000,000 and the buyer walked away.  I then re-sold the property for $995,000.  My buyer has all the legal right in the world to sue the original buyer for the $5,000 difference as well as any additional carrying costs and expenses (property tax, mortgage interest, utilities, insurance, et al for the additional time period the property was owned).

But would they?

No.  It’s not worth it.  Not for $5,000.  Not with the cost of a legal action, the time, and the headache.

About a decade ago, a colleague of mine sold a house for about $1,800,000 only to have the buyer walk, and after a second buyer walked, believing there was something wrong with the house, they ended up selling about six months later for $1,550,000.  That seller sued the original buyer for the $250,000 difference, and they ultimately settled for an undisclosed amount.

In those cases, yes, the seller will more than likely sue the buyer.

But when the buyer walks away from a deal for the lowest-priced real estate in the city, and the seller owns fifty condos, and you know you can resell the property for within a grand or two, you really don’t do anything about it.

Of course, that didn’t stop me from trying!

Oh, I threw everything at this guy!

I told him that the seller was worth $200 Million and he would get a “kick” out of suing the buyers because he was bored in life, and he liked going to court.  I told him that the seller might choose to sue them for ten million dollars, just for fun.

I told him that he would be put on our brokerage blacklist of agents we shouldn’t deal with.

I made all kinds of empty threats, which you might think is mean or just plain wrong, but it’s my job.

And in the end, he was unmoved, as were his buyers.

“The seller’s lawyer is sending a letter to your Broker of Record this afternoon,” I told him.  But he simply said, “I understand, you do what you need to do.”

So that was that.

I went back to the agent who had submitted the conditional offer for $1,000 less, and told her the deal had fallen through.  She followed up one day later with an unconditional offer, on account of her buyer getting financing approved in those two days that had passed since the offer date, and we re-sold the unit.

Just like that.

So what’s the take-away here, folks?

The happy ending might make this seem like much ado about nothing, but ignore that for a moment.

What do you do, as a seller, when the buyer doesn’t show up with the deposit?

You do what you can.

But ultimately, if the buyer doesn’t show up with the deposit, and refuses to go forward, you’ll have to decide whether legal action is worthwhile.  What is the potential financial loss and what is the cost of the legal action?  As I said before, it rarely ever ends up in court.

The true moral of the story here is: always make sure you get a deposit cheque along with any offer you plan to accept.

When you’re hosting an “offer night,” you usually do.  You can insist on a draft to accompany the offer, but buyers don’t have to listen.  It might be to their detriment, but it’s their decision.

But if you don’t have a bank draft, you can’t really drive the buyer to the bank and force them to produce one.  You have to weigh the presence or absence of a bank draft against other offers with a bank draft.

Of course, if you have six offers, and none have a bank draft, well, you’re outta luck.  You can’t sit on the offers.  You have to move forward with one of them, and hopefully you don’t end up writing a blog post about it!

First time (I think?) for everything, right?

Written By David Fleming

David Fleming is the author of Toronto Realty Blog, founded in 2007. He combined his passion for writing and real estate to create a space for honest information and two-way communication in a complex and dynamic market. David is a licensed Broker and the Broker of Record for Bosley – Toronto Realty Group

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  1. Pingback: Best Real Estate Agent In GTA – What Happens When The Buyer Doesn’t Deliver The Deposit? – Toronto Realty Blog
  2. Verbal Kint

    at 10:05 am

    “I made all kinds of empty threats, which you might think is mean or just plain wrong, but it’s my job.”

    I think it contravenes the REBBA Code of Ethics. Not smart either. What if this agent actually believes you that he’s on the Bosley Blacklist (which would be another violation) and avoids submitting a good offer to another Bosley agent sometime down the road?

    All over $1,000?!

    1. Tony

      at 3:48 pm

      David, when are you going to dox this asshole?

      1. Appraiser

        at 4:18 pm

        Doxing or threatening to dox someone is punishable under Section 164 (1) of the Criminal Code of Canada.

        I know because I looked in to it.

        1. Chris

          at 4:41 pm

          164 (1) A judge may issue a warrant authorizing seizure of copies of a recording, a publication, a representation or any written material, if the judge is satisfied by information on oath that there are reasonable grounds to believe that

          (a) the recording, copies of which are kept for sale or distribution in premises within the jurisdiction of the court, is a voyeuristic recording;

          (b) the recording, copies of which are kept for sale or distribution in premises within the jurisdiction of the court, is an intimate image;

          (c) the publication, copies of which are kept for sale or distribution in premises within the jurisdiction of the court, is obscene, within the meaning of subsection 163(8);

          (d) the representation, written material or recording, copies of which are kept in premises within the jurisdiction of the court, is child pornography as defined in section 163.1; or

          (e) the representation, written material or recording, copies of which are kept in premises within the jurisdiction of the court, is an advertisement of sexual services.


          Which part of the above, in your opinion, renders the publishing of identifying information illegal?

          1. Appraiser

            at 5:52 am

            Oops: Should read section 264 (1). Criminal harassment.

          2. Chris

            at 11:03 am

            “264 (1) No person shall, without lawful authority and knowing that another person is harassed or recklessly as to whether the other person is harassed, engage in conduct referred to in subsection (2) that causes that other person reasonably, in all the circumstances, to fear for their safety or the safety of anyone known to them.

            Prohibited conduct

            (2) The conduct mentioned in subsection (1) consists of

            (a) repeatedly following from place to place the other person or anyone known to them;

            (b) repeatedly communicating with, either directly or indirectly, the other person or anyone known to them;

            (c) besetting or watching the dwelling-house, or place where the other person, or anyone known to them, resides, works, carries on business or happens to be; or

            (d) engaging in threatening conduct directed at the other person or any member of their family.”

            The context here is almost certain to be the determining factor.

            If you posted my name, address, phone number, and any other publicly available or private information you could find, and encouraged others to harass me, that could fall under 264 (1), or other cyberbullying related statutes.

            If I was defaming you though, which could itself fall foul of 298 (1), and you posted my name or other identifying information in a suggestion that I will be held accountable for my libelous comments, I suspect I’d have a harder time prosecuting you under 264 (1).

      2. David Fleming

        at 6:03 pm

        @ Tony

        I’m not going to do that. People have a right to post whatever they want on this forum so long as it’s not about my family.

  3. Sirgruper

    at 6:33 pm

    Wow this got off topic.

    David. Three points:

    1. Transactions not closing or being delayed are more common than you let on. Had one last one last month. They tend to happen when markets change quickly or buyer’s circumstances suddenly change or they screwed up in the buy and can’t get financing but it happens. Ask any real estate lawyer. The best remedy – a substantial deposit – not 5%. It should be something that hurts.
    2. I think the certified deposit cheque or bank draft is a newer bidding thing but I have never bought this way and I believe its still the minority. In large or commercial transactions you will never see this. Better to know your client (or try to understand who the buyer is and why, how they are buying).
    3. You are definitely correct that there is no point suing especially as the jerk buyer could have tied up the property in the interim. However, if there is a true loss, the buyer is definitely on the hook and has liability for the loss.

  4. jeff316

    at 9:54 am

    People often mistake threats for persuasion. Your candour is the best part of this blog but sometimes it lets you down and this is one of those times. Great blog though – and after all these years!

  5. M

    at 12:01 pm

    David, what happens if the buyer brings a deposit w/ firm offer, backs out, and the property is resold for a HIGHER price? Does the seller get to keep the deposit from the fallen through deal? Thanks!

    1. Jennifer

      at 12:17 pm

      they should pay the first buyer a commission and then send them a thank you basket!

    2. David Fleming

      at 2:45 pm

      @ M

      There are only three ways that a deposit can be released from a brokerage’s trust account:

      1) Completion of a transaction
      2) Mutual release signed by buyer and seller
      3) Court order

      If you sold your house for $500,000, and the buyer submitted a $25,000 deposit to be held in trust pending completion, and the buyer refused to close, then five months later, whether you sold your house for $475,000, $500,000, or $525,000, you would still have to sue for that $25,000 deposit.

      Of course, the buyer could agree to sign a mutual release to let you keep $5,000, just to get his $25,000 back.

      A colleague of mine sold a condo last month and the buyer submitted a $50,000 deposit. The buyer changed his mind, wanted out of the deal, and the seller balked. So the buyer signed a mutual release to get $40,000 of the $50,000 back. I was shocked! Who gives away $10,000 just like that? Well, maybe a dummy, but maybe a really smart person too.

  6. Brenda Sharman

    at 7:21 pm

    Very interesting, good info. Thanks for sharing!

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