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

Updated March 13, 2023.

The deposit made by the buyer at the time of the signing of the contract is intended as a good faith showing of the buyer’s sincerity and commitment to the proposed transfer by committing funds which the buyer could forfeit if he/she backs out. As such, the size of the deposit is directly related to the purchase price, the ability of the buyer and the resources available to the buyer. The size of the deposit has no material bearing on the substantive terms of the contract itself. Of course, the larger the deposit, the less likely it is that a buyer would back out and risk forfeiting the deposit.

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