How to Secure Your Dream Home in Orange County

Schnieders Real Estate Podcast

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When you buy a home, you want to have the seller take your offer seriously. One way to do this is to offer a Good Faith Deposit, or an Earnest Money Deposit. These are not to be confused with a down payment - that is different.
If the seller accepts your offer, your Earnest money will go towards the purchase of the home. If you back out, there is a chance that you could forfeit your Earnest Money. This is a tradition in the real estate market in order to show good faith when you put down an offer.

In a California purchase agreement, the deposit has to be in escrow within three days after your offer is accepted. Exact amounts should be spelled out in your purchase agreement so there can be no quibbling about what needs to be deposited and when. These Earnest deposits usually range from 1% to 3% of the purchase price. You can put down less or more, but it's really a matter of local custom.
If you back out of a contract for no good reason, you could lose your earnest money deposit. This is why contingencies are important when you write your purchase contract. If you simply change your mind about the home, the seller can likely keep that money.

Lastly, I want everyone to know that an Initial deposit is commonly required for purchasing homes in CA (as outlined by the Residential Purchase Agreement). The actual amount of the deposit isn't standardized, but you must pay an initial Good Faith or Earnest Money deposit, which comes out of your down payment toward the home.

If you have any further questions about this process, please don't hesitate to contact me. I would love to speak with you!