Blog > The Deposit Protection Guide: Wire Fraud, Bounced Bank Drafts and Default Remedies
The Deposit Protection Guide: Wire Fraud, Bounced Bank Drafts and Default Remedies
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What happens if a buyer deposit is late or fails in an Ontario home sale
In most Ontario home sales, the buyer’s deposit is due within 24 hours of acceptance and is held in trust, usually by the listing brokerage. If it arrives late, the deal is not automatically cancelled: the outcome depends on the agreement’s wording and how the seller responds, so sellers should get legal advice right away. To prevent fraud, verify payment instructions by phone using a number you already have, never one from a new email. If a buyer fails to close, the seller can usually keep the deposit and may sue for further losses, such as a lower resale price and carrying costs.
Why the Deposit Window Matters
The deposit shows the buyer is committed and gives the seller security if the buyer does not close. Once an offer is accepted, the clock starts. The standard Ontario agreement defines payment “upon acceptance” as within 24 hours, unless the parties agree otherwise. Those 24 hours are when most deposit problems happen: delays, fraud and misunderstandings about how to pay.
Michael John Lau, a REALTOR® with the Kaizen Real Estate Team, one of the most active real estate teams in Markham and York Region, confirms deposit instructions with buyers by phone before they send funds, so there is no confusion during the most sensitive part of the deal.
What Happens If the Deposit Is Late
A late deposit does not automatically end an agreement. Whether the seller can treat the deal as terminated depends on the wording of the agreement, whether time is stated to be of the essence, and what the seller does next. A seller who accepts a late deposit without objection may be treated as having waived the deadline.
| If you are the | What to do right away |
|---|---|
| Seller | Call your lawyer before accepting late funds or relisting. Keep written records of the deadline and communications. |
| Buyer | Tell the brokerage immediately if payment will be late, explain why, and confirm a new time in writing. |
Protecting Against Wire Fraud
Real estate regulators have documented scams where a fraudster gains access to an email thread between agents and sends a convincing message with new deposit instructions. The money goes to the fraudster, and it can be very hard to recover.
- Treat any change in payment instructions as a red flag.
- Call to verify, using a phone number you already have, not one in the email.
- Confirm with the deposit holder, usually the listing brokerage’s trust account.
- Check email addresses carefully for lookalike spellings.
- Be wary of urgency. Pressure to pay quickly is a common tactic.
If you think funds went to the wrong place, call your bank immediately, then your brokerage and the police.
Buying or selling in Markham? Call Michael John Lau, REALTOR®, at (416) 700-0286 before sending any deposit, so instructions can be confirmed.
Bank Drafts and Counterfeit Payments
Counterfeit or stolen bank drafts are another risk. A draft can look real and still be returned days later. Brokerages and lawyers often prefer electronic transfers to their trust accounts for this reason. If a draft is used, the deposit holder may verify it with the issuing bank before treating the deposit as received.
When a Buyer Fails to Close
If a buyer does not close, the seller can generally keep the deposit and may claim additional damages. Courts usually look at the difference between the agreed price and the price on a later resale, plus reasonable carrying and resale costs, less the deposit. Sellers have a duty to take reasonable steps to resell and limit their losses.
In Redstone Enterprises Ltd. v. Simple Technology Inc. (2017 ONCA 282), the Ontario Court of Appeal allowed the seller to keep $750,000 in deposits, about 7.3% of the price, even without proof of damages, and stressed that relief from forfeiture is granted only in exceptional circumstances. For buyers, see what happens when an appraisal comes in low, one of the common reasons buyers struggle to close.
How Big Should the Deposit Be?
There is no fixed rule. In the GTA, resale deposits are often a few percent of the price, while pre-construction deposits are usually larger and paid in stages. For sellers, a larger deposit offers more security if the buyer fails to close. For buyers, a meaningful deposit can make an offer more attractive without raising the price, but it is also more money at risk. Agree on an amount that reflects the price, the buyer’s position and how long it is until closing.
Title Fraud and Identity Checks
Title fraud happens when someone poses as an owner to sell or mortgage a property they do not own. Lawyers and brokerages verify identity, and title insurance can protect buyers and lenders against many title problems. Owners can watch for unexpected mail about mortgages they did not take out. If you are selling a property you do not live in, expect extra identity checks.
A Deposit Checklist for Buyers and Sellers
- Confirm the deposit amount, deadline and holder before you sign.
- Arrange the funds in advance, especially if they are coming from investments or abroad.
- Verify payment instructions by phone.
- Get a receipt from the deposit holder.
- Keep every communication in writing.
Ultimately, the decision is yours. The goal is to make sure you have all the information before you sign.
Next Steps
- Buying a home in Markham: a safe process from offer to closing.
- Selling your Markham home: how deposits are protected.
- How the buying process works: every step explained.
Frequently Asked Questions
When is the deposit due on an Ontario home purchase?
In the standard Ontario agreement, a deposit payable upon acceptance is due within 24 hours of acceptance, unless the parties agree otherwise.
Who holds the deposit in Ontario?
Usually the listing brokerage, in its trust account. Sometimes a lawyer holds it. The deposit is credited to the buyer on closing.
Does a late deposit cancel the deal?
Not automatically. It depends on the agreement’s wording and how the seller responds. Both sides should speak with a lawyer right away.
How can I avoid deposit wire fraud?
Treat any change in payment instructions as a red flag, and verify by phone using a number you already have, not one from the email.
What happens if a buyer does not close?
The seller can usually keep the deposit and may sue for further losses, such as a lower resale price and carrying costs, while taking reasonable steps to resell.
Can a buyer get the deposit back after failing to close?
Only in exceptional cases. The Ontario Court of Appeal in Redstone (2017) said relief from forfeiture requires unconscionability, which is rare.
Work With Michael John Lau in Markham
Michael John Lau helps Markham buyers and sellers through every step after an offer is accepted, including confirming deposit instructions and deadlines. He works with your lawyer so problems are addressed quickly. The goal is a secure transaction and a smooth closing.
📞 Contact Michael John Lau, REALTOR®
🌐 www.callmikelau.com
Want a safe, well-managed transaction?
Michael John Lau confirms every deposit instruction by phone and keeps you informed from offer to closing.
Michael John Lau, REALTOR® · Markham, Ontario · (416) 700-0286
Disclaimer. Michael John Lau is a licensed REALTOR® serving buyers and sellers in Markham, Ontario and the Greater Toronto Area. Case law is from Redstone Enterprises Ltd. v. Simple Technology Inc., 2017 ONCA 282, as summarized by McMillan LLP. Fraud guidance is drawn from published regulator warnings, including the Real Estate Council of Alberta. Each agreement is different; speak with a real estate lawyer about your situation. Michael John Lau is not a lawyer, accountant, tax advisor or mortgage professional. This article is general information, not legal, tax or financial advice. Speak with a qualified professional about your own situation.