Good Faith Deposit ? Real Estate Transactions

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

If you are selling your home, condominium or other real estate, you should always require a buyer to make a good faith deposit. The good faith deposit simply establishes that the buyer is serious and, to some extent, 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. Although percentages vary from state to state, a cash deposit equal to three percent of the sales price is typical. For instance, the deposit would be $9,000 for home selling at a price of $300,000. As with most transactions, this percentage is negotiable. I don't recommend that you accept anything less than two percent.

Once the buyer and seller agree to the amount of the good faith deposit, you have to figure out what to do with the deposit. Importantly, the seller should not hold the deposit as doing so could make the buyer very uncomfortable. Instead, the money should be deposited with a third party and held "in trust." Potential third parties include escrow and title insurance companies as well as an attorney if your state requires their involvement.

A good faith deposit acts like an insurance option for a seller. Moving through escrow can take 30 to 60 days, during which the property is off the market. The good faith deposit essentially compensates the seller for this time in the event the buyer is unable to follow through on the purchase of the property.

Depending on the laws in your state, a buyer who can't close will lose the deposit. 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. Of course, including such language can open the seller 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. Buyers should expect to pay them and sellers should demand them.

Raynor James is with http://www.fsboamerica.org - providing homes for sale by owner, "FSBO", properties. Are you thinking, "Should I sell my home?" Visit http://www.fsboamerica.org/seller.cfm to sell your home sale for free for one month.

---

How Not To Blow Your Build Budget

Most people who complete a self build will go on... Read More

10 Ways To Find Investment Properties

If you really want the best deals in investment properties,... Read More

Investment Real Estate -- A New Twist: Be the Bank, Not the Landlord, and Get Rich Without the Work!

I was a landlord for a decade, and I believe... Read More

Tenants in Common (TIC)

Tenants in Common is a way of sharing ownership of... Read More

Easing Your Way Into Homeownership: A Guide To Low Down Payment Mortgage Programs

There's no question about it: Buying a first home is... Read More

Real Estate Investment - One Simple Formula

I saw the ads in our small-town newspaper for years... Read More

Home Hunting and the Internet

So, it's home hunting time. Where do you start? Who... Read More

Property Auction & Why You Should Run A Mile From Them

That's A Funny Thing To Say About Property Auctions; They're... Read More

Residential Income Property Financing: Part 2 of 3

Welcome to the second segment of a three-part series about... Read More

Home Staging: How to Make Your Tract Home Stand Out in the Crowd

Home sellers who wish to market their property in development... Read More

Oh No! Something has Happened in Florida

The Florida housing market has attracted many foreigners to invest... Read More

How to increase the Saleable Value of your Home

When selling your home, you'll want to fetch the best... Read More

Home Buying Checklist ? Windows

If you are in the market to purchase a home,... Read More

Property in Northern Spain

If you're looking for the 'real' Spain where the culture,... Read More

5 Things to Look for in a Property Appraiser

Homeowners who are seeking a property appraiser often ask "How... Read More

Real Estate Research By Talking

Real estate research might start with a look at the... Read More

Five Things to Help Sell Your Home Fast, and For More Money

Selling your home requires some thought and a clear plan... Read More

Writing on the Wall - Are REITs a Better Investment for You?

When I was a young child I had many annoying... Read More

What to Look for in a Real Estate Agent

Real Estate Agents play an essential, critical role in the... Read More

Ten Myths Of Real Estate Investing

Is real estate investing only for the wealthy? Can you... Read More

Investing In Land

Changing social trends point to a huge rise in demand... Read More

Reinventing Real Estate, Part 2: Online and Empowered Consumers Are Taking Charge and Paying Less

Demanding consumers"Internet buyers tend to be better informed on market... Read More

Real Estate Financing - Ten Ways

Do you remember when real estate financing meant you saved... Read More

Green Building Media Fact Sheet - Past, Present & Future

PastSpecialized, niche home builders began constructing resource-efficient, environmentally sensitive homes... Read More

Dont Sell It Yourself

Don't sell it yourself! Sometimes a "FSBO," or house "for... Read More

How To Get The Best Rental Accommodation In The Area By Using Your Capital

My report is for you to use your power to... Read More

The 5 Biggest Mistakes Made When Getting A Business Appraised

Most business owners will, at some point, want or need... Read More

Tidy Up The Outside, Reap The Rewards

There isn't a realtor in existence who wouldn't tell you... Read More

Selling Your Own Home ? Pet Issues

If you are selling you own home, you need to... Read More

Is An Old Home for You? ? The Pros

If you prefer a home that is unique and has... Read More

Housing Froth Creating Imbalance for Consumers and Investors

Home buyers and sellers should think twice before jumping into... Read More

Property Investing Secrets 7

Property Investing Secrets:How Buying Real Estate Is Like Planning a... Read More

Home Owner Association Restrictions ? Read Before Buying

Many communities have associations for homeowners, property owners, condo owners,... Read More