What happens to your deposit if the deal falls apart?

Nobody gets it automatically. A brokerage can only release a disputed deposit on a form both sides sign or a court order, and after two years it goes to RECO.

The deposit does not move on its own. It sits in the brokerage's trust account where you sent it, and it stays there until you and the seller both sign a release saying where it goes, or a court orders where it goes. There is no clock that quietly returns it to you.

That is the whole answer. What follows is who decides, what happens when nobody will sign, and what works differently on a new build.

Who decides where your deposit goes?

You and the seller do, in writing, together. If you cannot agree, a judge does.

The Real Estate Council of Ontario, which regulates brokerages in this province, states that where there is a dispute over who owns a deposit, "a brokerage can only disburse the deposit in accordance with the terms of a mutual consent and or release form signed by both the buyer and seller or by following instructions in a court order" (Real Estate Council of Ontario).

Read that as a list of everyone who cannot hand the money back: your agent, the listing agent, the brokerage holding it, and the regulator itself. Nobody inside the transaction has the power to settle the argument.

In July 2026 the average selling price across the GTA was 4.5 per cent lower than a year earlier, homes sold at 97 per cent of the asking price after 32 days on the market, and 14,484 new listings came up against 5,995 sales, according to TRREB Market Watch. None of that changes the rule above. What it changes is how much a frozen deposit costs you while it is frozen, because that money is usually needed for whatever you do next.

Can you get your deposit back if you walk away?

Only if the seller signs the release, or a court says you are entitled to it.

If your offer carried a condition and the condition was not met, the agreement ends on its own terms and the release is usually signed without argument. That is what a condition is for, and it is the only clean exit Ontario gives you on a resale home. The province states there are no rules in legislation setting a period in which you can cancel a resale purchase without penalty, which is why it puts the phrase "cooling-off period" in quotation marks (Government of Ontario).

On a firm offer there is no condition to fall back on. Our guide to firm and conditional offers sets out what each one commits you to.

Either way the money moves on a signature or a court order and on nothing else.

What if the seller refuses to sign the release?

The deposit stays where it is and the argument goes to court.

There is no penalty clock, no automatic release, and no process inside the brokerage that can decide it for you. The brokerage has to hold the money until it has either the signed release or the order. If you find yourself there, it is a question for your own lawyer rather than for your agent, because entitlement turns on the agreement you signed and on what each side did after signing.

What happens if nobody ever signs?

After two years the money leaves the brokerage and goes to the regulator, and the same two keys still open it.

RECO states: "In the event a brokerage holds onto a deposit for two years and it has not been determined who the deposit should be disbursed to, the deposit is then transferred to, and held in trust by, RECO. RECO can only disburse the deposit in accordance with the terms of a mutual consent or release form or by following instructions in a court order" (Real Estate Council of Ontario).

So a deposit does not expire, and neither side wins by waiting it out. That is worth costing before either party digs in over a few thousand dollars.

Is your deposit protected if something happens to the brokerage?

Yes, up to $200,000 per claim, at no cost to you. It does not cover a disagreement.

Every registered broker and salesperson in Ontario has to take part in the insurance program RECO administers, and it includes consumer deposit insurance. It responds to brokerage theft, fraud, insolvency or misappropriation of funds, to a maximum of $200,000 per claim and $4 million for all claims arising from a single event, with no deductible (Real Estate Council of Ontario). Ontario's own guidance for buyers carries the same $200,000 figure (Government of Ontario).

Being deceived into sending your deposit to a fraudster is covered separately, to a limit of $25,000. RECO's advice on that is worth following to the letter: where money transfer instructions change from what the agreement said, check with your brokerage in person or by phone before sending anything.

What the insurance does not do is settle a dispute. Where the parties cannot agree on disbursement, RECO says the coverage "does not respond".

What is different on a new build or a pre-construction condo?

A different body protects the money, the limits are lower, and there are deadlines attached.

Condominium deposits have to be held in trust under the Condominium Act. If the builder terminates your agreement your deposit must be returned in full within 10 days, and if the builder does not return it, Tarion provides deposit protection of up to $20,000 (Tarion).

On a freehold new home with an agreement signed on or after 1 January 2018, Tarion covers up to $60,000 where the sale price is $600,000 or less, and 10 per cent of the purchase price to a maximum of $100,000 above that.

From 1 April 2026 a buyer should register the purchase agreement with Tarion within 45 days of signing to qualify for the maximum coverage. Registering later, or not at all, moves the claim into a separate $15 million fund carrying an annual sub-limit. Tarion has deferred that change to 1 January 2027.

A new condominium also carries the cooling off period a resale home does not have. You have 10 days from receiving the fully signed agreement and the disclosure statement to cancel, and the developer generally has to refund the deposit plus any interest payable (Government of Ontario).

One gap is worth knowing. RECO's deposit insurance does not follow the money to a builder: where the brokerage has paid your deposit to a builder's lawyer under the terms of the agreement, that coverage does not respond, and Tarion becomes the protection instead.

How do you stop the question coming up at all?

Three things, and every one of them happens before you sign.

Write the conditions you actually need rather than the ones that look tidy on paper. A condition is the only clean exit on a resale purchase, and it is also the difference between a release the seller signs in a day and one you argue about for a year.

Send the deposit exactly the way the agreement directs, and confirm any change by phone. It goes to the listing brokerage in trust, never to a person, and a last minute change of instructions is the standard shape of the fraud that the $25,000 coverage exists for.

Size the deposit against your own risk rather than against what feels competitive. Our guide on how much deposit to put down covers what the number does in a negotiation, and the cash to close calculator shows where it lands on closing day. If you are working out the whole purchase from the start, our buyer pages walk through the order it happens in.