In a real estate transaction, a touchy issue is how much trust the seller has in a buyer. The existence of a good faith deposit helps put a seller at rest.
Good Faith Deposit
You should always require a buyer to make a good faith deposit if you are selling your home, condominium, or other real estate. Simply establishing that the buyer is serious is the good faith deposit and to some extent, it has the financial capacity to follow through on the purchase.
The amount of the good faith deposit is dependent upon the agreed sale price of the real estate. From state to state, percentages may vary but a cash deposit equal to 3% of the sales price is considered typical. For example, there will be a $9,000 if you sold a home at a price of $300,000. Just like with most transactions, you can negotiate this percentage. It is not recommended that you accept anything less than two percent.
You have to figure out what to do with the deposit once the buyer and seller have agreed to the amount of the good faith deposit. Importantly, the seller should not hold the deposit as doing so could make the buyer very uncomfortable. What you can do instead is deposit the money with a third party and hold it "in trust." Escrow and title insurance companies as well as an attorney if such an involvement in required in your state are what you can consider as potential third parties.
For a seller, a good faith deposit will act like an insurance option. It can take 30-60 days to move through escrow and the property is off the market during this time. In the event that the buyer is unable to follow through on the purchase of the property, the good faith deposit will essentially compensate the seller for this time.
A buyer who can't close will lose the deposit but this will depend on the laws in your state. Typically, the only exception to this is when the seller allows language indicating the deposit will be returned if the buyer can't get a home loan. But by including such a language, the seller can be opened up to repeated frustration when bad credit buyers repeatedly fail to get funding.
Good faith deposits are a fundamental part of a real estate transaction. The buyers are expected to pay them while the sellers should demand them.
Good Faith Deposit
You should always require a buyer to make a good faith deposit if you are selling your home, condominium, or other real estate. Simply establishing that the buyer is serious is the good faith deposit and to some extent, it has the financial capacity to follow through on the purchase.
The amount of the good faith deposit is dependent upon the agreed sale price of the real estate. From state to state, percentages may vary but a cash deposit equal to 3% of the sales price is considered typical. For example, there will be a $9,000 if you sold a home at a price of $300,000. Just like with most transactions, you can negotiate this percentage. It is not recommended that you accept anything less than two percent.
You have to figure out what to do with the deposit once the buyer and seller have agreed to the amount of the good faith deposit. Importantly, the seller should not hold the deposit as doing so could make the buyer very uncomfortable. What you can do instead is deposit the money with a third party and hold it "in trust." Escrow and title insurance companies as well as an attorney if such an involvement in required in your state are what you can consider as potential third parties.
For a seller, a good faith deposit will act like an insurance option. It can take 30-60 days to move through escrow and the property is off the market during this time. In the event that the buyer is unable to follow through on the purchase of the property, the good faith deposit will essentially compensate the seller for this time.
A buyer who can't close will lose the deposit but this will depend on the laws in your state. Typically, the only exception to this is when the seller allows language indicating the deposit will be returned if the buyer can't get a home loan. But by including such a language, the seller can be opened up to repeated frustration when bad credit buyers repeatedly fail to get funding.
Good faith deposits are a fundamental part of a real estate transaction. The buyers are expected to pay them while the sellers should demand them.
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