What is a "Good Faith Deposit?"

So you have found a home that you love and want to place an offer.

The agent says "Bring your check book for the initial deposit." What does this mean?

In the contract on page 1 (California Residential & San Francisco), there is a place for the buyer to state how much of an initial deposit they are placing into Escrow for the home they would like to purchase. This does not mean that the property will be held for you or that it gets taken off the market. Although it does show 'Pending show" on the Multiple Listing Service. This allows the seller to still market the property, but advises agents and buyers that and offer has been place on the property. Until the release of contingencies from the buyer the property is still on the market. Contingencies allows the buyer to investigate the property, disclosures and secure the appropriate financing. The initial deposit is more like a goodwill gesture, indicating to the seller that you are serious about the prospective purchase.

How much is a typical initial deposit?

A typical initial deposit is 3% (Three Percent) of the purchase price. Ex: On a $500,000 home the deposit would be $15,000. The check is made out to the Title Company and dated according to the purchase agreement. Once the offer is accepted or ratified the check is deposited into the Escrow account within 3 business days.

What happens to the Deposit when we close Escrow?

When it's time to close Escrow, the 3% will be applied toward the required funds needed from the buyer. Required funds could include lender closing costs, inspections billed to Escrow, down payment, points paid, escrow fees or anything that is non-recurring.

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