What is the purpose of a deposit and how much should it be?

The deposit is money paid into escrow by the buyer at the time of the signing of the sale agreement as a good faith showing of the buyer’s commitment to the proposed sale of the property. If the buyer defaults and does not go through with the deal, the seller is generally entitled to keep the deposit. The size of the deposit should be sufficient to deter the buyer from walking away from the deal. So, the larger the deposit, the less likely it is that a buyer will back out and risk losing the deposit.

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