Buying your first home is an exciting moment! There’s a lot that goes into purchasing real estate that might leave you with a lot of questions. Working with an experienced professional will help build your real estate knowledge and simplify the process. We’ve created our Ask the Experts series to answer some of your most common real estate questions.
A good faith deposit, also known as earnest money, is a deposit the home buyer makes to hold the property in question. This money is meant to show the buyer’s “good faith” towards closing on the home. When a buyer provides this money when making an offer, it shows the seller that the buyer is making a serious offer. This deposit is negotiable through the sale’s contract.
When a buyer makes a good faith deposit, the money doesn’t go directly to the seller. Rather, the listing agents puts the money in a special escrow account where it stays until closing. This money is then used as part of the down payment.
While the good faith deposit indicates the seller fully intends to buy the home, sometimes the sale doesn’t work out. There are certain instances where the buyer can terminate the sales contract. One situation is if a defect is found during a home inspection that is unsatisfactory to the buyer. Another instance may be if the buyer is unable to obtain financing.
In most situations, the buyer will get the money back if the sales agreement is terminated. There are possible situations where the buyer might lose the deposit, however. Having a skilled real estate agent work with you when buying a home will help ensure you don’t get into a situation where you may lose a deposit. Additionally, your agent will help you determine how much earnest money you should put down when making an offer.
Sarah is a content writer and social media assistant with a BA in literature/creative writing from Wilkes University. When she’s not spending her days at work writing, reading, and drinking coffee, she’s usually at home reading, writing, and drinking coffee. She also devotes a fair amount of time to HGTV, drawing, and doting on her dog. As a creator, Sarah believes in emphasizing personality through design and DIY projects.