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Often buyers have asked me this question, so I thought I would write a post on this subject.










                      In California a good faith deposit is given at the time an offer is made. A good faith deposit will show a seller that you are a serious buyer, and building the seller’s trust is important. A deposit paid by a buyer to a seller to demonstrate intention to complete the purchase. also called earnest money.  While good faith deposits can be as little as one dollar, I recommend a 3% good faith deposit. When I review an offer for a seller, the good faith deposit gives me an idea as to the strength of the buyer, and a weak deposit sends up a red flag. The good faith deposit is held in the escrow. The liquidated damage clause (if initialed by both the buyer and seller) states that if the buyer fails to complete the purchase because of buyer default, the seller shall retain the good faith deposit not to exceed 3%. If the liquidated damages are not initialed and the buyer breaches the contract, the seller could sue for more than the 3% if the sller can prove default by the buyer. Contingencies must be removed in writing before a buyer is in default. If the buyer has not removed their contingencies and has stated one of the contingencies as their reason for not performing, the seller is not entitled to retain the good faith deposit. If you want to get the sellers attention, and purchase the property at the best price, the good faith deposit can help. Weak good faith deposits tell the seller that you may be a buyer that is not qualified, lacking funds to close, or fishing on a number of different properties. The good faith deposit will be applied to the down payment and closing costs at the close of escrow.


 Down payments are paid as final funds at the close of escrow. Depending on the loan amount down payments can be any amount. Obviously the larger a down payment the stronger the offer. All cash offers are the strongest offers, but a well qualified buyer with a strong down payment of 20% are welcomed by most sellers and lenders. With new lender requirements a strong down payment helps reduce the risk for the lender by creating equity in the property and decreasing the loan to value equation.


If you would like to discuss Big Bear Real Estate , please give me a call.

Steve Hirschler

Associate, The Tim Wood Group

Coldwell Banker Mountain Gallery

42153 Big Bear Blvd.

P.O. BOX 6820

Big Bear Lake, CA 92315


909 866-3481 EXT. 217 CELL 909 725-5889

Fax 909 866-3531