Good Faith Deposit
When having a real estate transaction, most sellers wonder how much they can trust a buyer. However, the trust is reinforced if the buyer gives the seller a good faith deposit. This deposit informs the buyer that the seller is serious about buying the real estate and also to a certain extent shows that the buyer has the financial ability to close the deal.
The amount of a good faith deposit depends on the sale price of the property and the percentage varies from state to state. Usually a three percent of the sale price is given to the buyer as good faith deposit. For example, for a house that costs $300,000, the good faith deposit would be $9,000. A seller is usually advised not to accept less than two percent of the agreed sale price.
Once a buyer and the seller agree to the good faith deposit, the seller then has to think where the money should be deposited. He cannot hold on to the good faith deposit as the buyer too needs to trust the seller. Usually a good faith deposit can be deposited with a third party. Usual third parties that both buyer and seller can use are either escrow or title insurance companies. At times, even attorneys are used if the law demands that an attorney has to be involved in a real estate transaction.
For any reason if the buyer cannot close the deal, he ends up losing the deposit. This, however, depends on the laws that are prevalent in the state. If the contract states that the seller will return the deposit if the buyer fails to get a home loan, then the seller has to do it. This clause in the contract can cause the seller a lot of headaches if he has the misfortune of continuously getting buyers who have bad credit.
For buyers it is important to be prepared to pay good faith deposit if sellers so demand it. Good faith deposits are part and parcel of real estate transactions.
More Articles :
|
