What Happens to my Deposit if I get Cold Feet?

Interesting question!

The typical conditions in a house deal are home inspection and financing. These clauses usually state the buyer has the sole and absolute discretion to decide whether the home inspection report, or the financing, are satisfactory to them. If not, the deal is null and void and they get their deposit back. In that situation, both parties sign a Mutual Release and Termination (this is also signed by the real estate brokerages representing them), and the deposit is released in full without deduction to the buyer.

This  gets a lot trickier, however, where a buyer doesn’t take reasonable steps to fulfill the conditions or simply gets cold feet and walks away.

I recently had a situation where a buyer took no steps to  book a home inspection within the time period agreed to because they wanted to find out if they would get financing first.  I pointed out to their agent (after confirming my view with my client’s lawyer and my manager) that this could result in them forfeiting their deposit. It may seem clever to hold off on booking a home inspection until you know if you’re going to get financing  and save the cost, but it can get you into trouble. Every real estate deal has a clause in it that says “time is of the essence.” If you don’t get financing and didn’t even bother to book an inspection, you may not be acting in good faith.

The leading Ontario case on this is Greenberg, in which the court found that a contractual exercise of sole and absolute discretion must be exercised with honesty and good faith. This requirement was applied to a real estate deposit in a case called Marshall v. Bernard Place Corp.  While the court found no evidence of bad faith and ordered the deposit released, the Ontario Court of Appeal confirmed the buyer’s discretion when dealing with these types of conditions has to be exercised in good faith, honestly, and reasonably.

In Coghlan v Unique Real Estate Holdings Inc., a 2016 Ontario Superior Court decision, the seller applied for forfeiture of the deposit, and asked that the court direct the deposit be paid to him. He applied to a motions court on summary judgment (that’s where the court makes a decision without a trial). He argued the buyer hadn’t acted in good faith by relying on conditions, but instead had cold feet.

The court agreed. It held that even though the contract didn’t refer to forfeiture of the deposit in these circumstances, it didn’t have to — it was implied. It ordered that the deposit be forfeited to the seller. A deposit, the court said, was “earnest money,” and indicated that the buyer intended to be bound by the contract. The court quoted from Marshall:

The Agreement of Purchase and Sale does not provide that the deposit will be forfeited in the event that the Purchaser fails or refuses to complete the transaction. However, when the payment is a deposit, it is not necessary to include a provision in the contract. Unless the contract taken as a whole shows an intention to exclude forfeiture, the vendor is entitled on default of the purchaser to retain the deposit.

A deposit is considered to be “earnest money ” and an indication that the purchaser intends to be bound by the agreement and to complete the transaction. A reasonable deposit is usually considered to be somewhere in the range of three to ten percent of the total purchase price. In the event of default by the purchaser, the vendor is entitled to retain the deposit if the amount is within that reasonable range.

So, at least in Ontario, you can’t just walk away from a deal without doing what you said you would, and think you will get your deposit back.

The listing brokerage holding the deposit can’t release it without a Mutual Release and Termination, which as I noted, has to be agreed to by the seller. If the seller won’t sign because they think you have acted in bad faith, then the listing brokerage has to hang on to it until they are provided with a court order or a written agreement between the parties or something in writing from the parties’ lawyers directing how the money is to be paid out.

Does that mean the seller has to go to court to get the deposit?

They can, but they don’t have to. According to the lawyer I spoke with, they can do nothing, and simply refuse to sign the Mutual Release and Termination. That forces the purchaser to either apply to the court for the deposit to be returned (and prove they acted in good faith throughout) or reach agreement with the seller on  how the deposit will be dealt with. Given the expense of court proceedings, I suspect most of these situations are resolved with an agreement reached between the parties’ lawyers as to how to deal with the deposit.

The important thing is to realize  is that an “absolute discretion clause” doesn’t give you  an automatic right to get your deposit back unless you’ve held up your end of the bargain. So get your cold feet out of the way before you sign the deal – and be sure to book your home inspection right away.

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The third house I staged!

This is a lovely townhouse in Hunt Club but the L-shaped dining room was a bit of a challenge and the client had oversized furniture. I solved that by creating a couple of different focal points: the art is all mine, so are the vases and cushions.


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The art over this sofa comes right out of my own bedroom – I thought it needed something sophisticated, and it really draws the eye. I added a large mirror over the fireplace as well.

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I also picked out a new drum shade chandalier for their dining room and found a matching semi-flush for the kitchen, both from Rona, around $ 120 each, and there was a Scratch and Win sale so I got 15% off!

And because I had added bronze accents, I brought over a drum shade lamp with a bronze base from my own guestroom, so the space looks coherent and pulled together. Art in the dining room is again my own. (One of the frames on the artwork over that sofa is also bronze, so it all works well together.)

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The upstairs MBR was an easy one to stage: the seller had white bedding and some bright green pillows. I kept them and I hung a painting on the far wall (again, every room needs that graphic focal point) that had the same shade of green in it. I threw on a light gray/green quilt and shams which came from HomeSense several years ago.

Wisteria MBR

We removed the three piece folding mirror that was above the chest of drawers (so dated!) and I replaced it with a large mirror in a beautiful frame.Wisteria MBR 2

The loft sitting area was just a matter of adding a few cushions, accessories to highlight the mantle and a gorgeous piece of art, on loan from Frank Van Boxtel. Thanks Frank!

Wisteria loft

The main bathroom was an easy one to stage: no tub, only a shower, but I used some Moroccan-designed towels in green to add a bit of unexpected colour, tie that room into the MBR, and add that punch of graphics I mentioned. Once again, I used one of the floral arrangements I love to use in bathrooms (HomeSense, around $ 25). Love this piece of art, it’s one of the rare times I have found an original, signed painting at HomeSense and I grabbed it – I think it was on sale for $ 20!

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I left the owner’s office alone, other than to declutter it a bit, but I did add a chair, again from HomeSense: he didn’t have one, and it made all the difference in the world. Note that I did not have him remove photographs or degrees; the office is the one part of a house that I think can have personal items.

Wisteria office

The back yard was a bit overgrown; I suggested the owners pull up the weeds and add brown mulch — we also took the big potted plants out of the living room and popped them in the back corner — the yard looks amazing.

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And then I pulled out a wicker settee they had had in the back yard and moved it to the front porch with a few outdoor cushions I  picked up at Sears and Walmart years ago on sale. Love the big bold graphic design!

Wisteria Porch 1The last room I staged was the main floor powder room: the owner had a bronze towel rack so I picked up a bronze coloured metal wall hanging for $ 14.99 at HomeSense to pull that space together. Nice fluffy towels, some soap, a floral and we were done!

wisteria powder room

We had six showings today, by the way, and the feedback has all been great. Here’s hoping it all pays off!

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New testimonial #FirstTimeBuyer

“Happy Client!

“It has been an absolute pleasure working with Peggy, I can’t thank her enough for her diligent work in helping me find and purchase my first condo. From the very start, Peggy took the time to explain all aspects of the home buying process along with answering any and all questions I had.

“Her honesty and outstanding knowledge gave me the confidence to know I was making the right decision. I couldn’t be happier, Peggy truly looks out for her client’s best interests and it shows!

“Her professional and upbeat personality helped pave the way for a wonderful home buying experience. I’d highly recommend Peggy for anyone looking to purchase their new home.

“Thank you again, Peggy!”

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More staging results!

This is a lovely semi-detached that I staged for sale – we’ve had dozens of showings and are currently working on an offer.

This is the living room: I asked the home owner if they could remove two large bookcase/storage units on either side of the TV and that opened the room right up.

I picked up the rug at SmartChoice Furniture for $ 149 and I absolutely love it – it looks like needlepoint, and works with everything. The cushions on the couch are a mixture of ones I’ve collected over time: silk and shaggy (the latter is from HomeSense: if you look at my last post, you’ll see its mate on the other house I just staged and listed).

The two  black and white cushions on the little chairs are there for graphic impact – I bought the covers at Fabricland on sale a few years ago for less than $ 5/each and bought the cushion inserts.

The art is all mine: the photograph of Prague was a gift from a friend. I firmly believe that each room should have a graphic “punch” of colour or black and white so the photographs pop. (Those two little pictures on the wall, by the way, were all of $ 15 at HomeSense and I use them a lot: they look expensive.) The green and light blue silk pillow came out of my own home: I’d run out of staging items!

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The dining room needed a new light fixture: I picked this modern one up at Rona and absolutely love it too. Works with traditional and contemporary and looks like a very expensive light but it wasn’t!  Cost? Less than $ 150.

If you’ve seen my stagings before, you’ll recognize the artwork on the wall – it’s by a local artist and I use it all the time. I also try to always put out a bowl of pears: these ones are wooden, and again came from home, along with the glass bowl.  The little aloe plants on the window ledge were from Superstore, $ 5 each and the planter on the window was from HomeSense, around $ 30.

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The main bath had great bones but needed a little boost. I put in a waffle shower curtain with decorator hooks and hung this great Indian mirror on the wall (HomeSense, $ 40). A few soap dishes and soaps and it looks amazing. (I showed the homeowner how to fold her towels for maximum impact as well.) I always put a nice floral in a bathroom; this is one of my favourites – a glass vase of roses.

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The powder room was actually more work! The towel bar was broken: I replaced it and the toilet roll bar with ones from Umbra, purchased at HomeSense. The light fixture had been hung upside down; we fixed that. We took down an old mirror and put up one with a lovely frame. And a cupboard on the wall that took up space was removed; the whole room was painted. The artwork is from a trip I took to Nice, from the farmer’s market. And you’ll see what I mean about the towels.

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Finally, the bedrooms! The master, when I first saw it had a huge ceiling fan and blinds, which made the room very dark. I asked the sellers if they could remove the ceiling fan (it always sends a message to me that your A/C isn’t working!)  and they also removed the blinds.  The room is now so bright it’s incredible!

My client had white bedding – I dressed it up with a quilt set and a grey silk pillow. The art above the bed was a new purchase from HomeSense, I liked the fact it was almost abstract, even though it’s a floral, and even though the quilted bedding was blue and yellow (as well as white and black and grey), it worked. The vases are all from HomeSense.

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The last room to get a make over was the little guest bedroom. The client had the bedding and it was such a strong print that I decided to do very little. I bought the artwork for $38 at HomeSense and I love it; it’s an abstract that when you step away becomes birch trees – just stunning! The graphic design on the little pillow (remember – always have one item to draw the eye) works beautifully: that was a Lowes sale ($ 15).

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And so, with a mixture of high (mostly the art) and low, we really came up with a staging that shows this home off beautifully. It looks curated, as if all these items have been collected over time, which in fact, they have, so it doesn’t look or feel staged. All our agent comments have been positive — it shows very well.


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Staging your listings!

I have three new listings on the go this week, and I staged all of them. That’s a first for me – I usually stage one house at a time, so I’m a little tired, but thrilled with the results. I ran out of staging materials (cushions, towels, art) and had to buy more. Well worth it, I’d say! Here’s a look at a few rooms in one of them.

I have a listing hitting the market today at 1383 Sault. It’s an older home in immaculate condition with a lot of structural upgrades like newer roof, windows etc. But the kitchen had those old oak strips, so we painted those out: the appliances are older, but the kitchen now looks bright and clean. That little glass table and chair set  from Mikaza is one of my favourites: I use it a lot when I’m staging.

The living and dining rooms were a lot of fun to do: I rented the furniture from SmartChoice ($ 308 includes delivery and pick up – that’s a steal!) and purchased the cushions and art from HomeSense. I wanted to draw attention away from the beams, which were a little overwhelming:


I think it’s beautiful! I have to run off to an appointment but I’ll post early next week with the other transformations!

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Always get a second opinion!

I went to see a friend/client’s condo townhouse yesterday – she has been having water issues in the basement for a year and a half, as has one of her neighbours. She said the condominium board  had received an opinion from a structural engineer who told them that the water was coming in from above-ground and they needed to put a giant sump pump to solve the problem. They got a quote that said it was going to cost over $ 100K.


I suggested I came over to take a look and do a walk through as she wasn’t sure what to do about this problem and wants to get ready to sell.

So I walked into the basement to see what was going on. She had taken down the stained drywall and I could see where the water had come in before (there were clear signs of effluorescence on the concrete foundation). It also appeared that a waterproof membrane  had been installed some time ago, which meant there had been water issues  in the past.

What was notable to me was that there was  no  smell of must or mildew and that’s something I usually pick up on right away (I have allergies, so the tiniest bit of must hits me hard.)  I asked my friend when the last time was that she had water coming in. She said she’d had seepage between February and April last year but nothing since, although her neighbours have had problems this year. Which made no sense to me at all. Because we have had more rain than ever this summer, and if it was a seepage issue, they all should have had the same problem.

So I walked outside to look at the foundation and guess what I found! A nice little foundation crack, almost hidden from sight behind the fence post between the two properties, and right where the water had entered her basement.

Which means her water is probably coming from snow melt, not seepage, which explains why it was limited to February-April last year and why she didn’t get any water infiltration this year despite the heavy rains.

We didn’t get a lot of snow this year, and for water to leak through that crack, the snow would have to be a good foot above the ground and go through some freeze and thaw cycles. The rain this year never reached that level, except where we had extensive flooding, which is why it had no effect on her property.  I’m guessing her neighbours continued to have problems because her basement has a waterproof membrane and theirs doesn’t.

The difference in terms of cost is huge! The cost of repairing a foundation crack like that, I’d guess, will be around $ 1600, a bit higher than usual because they will have to take the fence post down to epoxy the crack. A far cry from the $ 100K the condo board was quoted, and I somehow doubt that giant sump pump will be needed.

The cost of installing a waterproof membrane at the neighbours is higher but nowhere near the quote the condo board got. I gave her the name of Ardel Concrete, my go-to foundation guys so that they can come over and give her an estimate that she can pass onto her condo board. I will be interested to see if they share my opinion but I would bet good money that once that crack is epoxied, that will be the end of my friend’s problem.

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Lovely surprise!

How nice to come back from a week at the lake and find this waiting in my inbox – it’s always great to have happy clients! Thanks, Dilia and Gilles!

We recently purchased an investment property in Mckellar Heights. Our agent, Peggy Blair, was instrumental in this acquisition, guiding us through every step of the process: Initial offer, the counter offer and the final purchase agreement.

She has an excellent network of tradespeople we relied on to inspect the house and ensure that everything was up to par before we put up the unit for rent. Peggy staged the house and secured solid tenants within a week of closing – a record time!

At all times, we felt we were in good hands and that Peggy had our interests at heart.

Her knowledge of the industry, her professionalism  and more importantly, her unwavering sense of ethics greatly reduced our stress as first time investors. We consider ourselves very fortunate indeed to have had Peggy as our agent.

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