Good Faith Money
Candlefocus EditorThe amount of good faith money paid usually ranges from 5 to 10% of the total purchase price and is generally non-refundable but it does count towards the purchase price. Both parties should draft an agreement for the good faith money that outlines the details of its use. This agreement should set out the purpose, the amount, and whether it will be returned or not, depending on the situation.
Good faith money is an important part of a successful transaction since it demonstrates a level of commitment by the buyer to purchase the subject item, real estate property or services. The higher the amount of the good faith money, the more likely it is that the buyer will follow through with the deal. It is a form of security that shows both the buyer and seller that the transaction can be completed with trust and faith in both parties.
For sellers, good faith money acts as a source of temporary capital that helps cover any costs associated with showing the property, making repairs and preparing the transaction documents.
In conclusion, good faith money is an important part of a real estate transaction and any commercial transaction. It shows the commitment of the buyer to go through with the purchase, and acts as a security deposit for both parties. The details of the good faith money, including the amount and whether it is refundable or not, should be in writing and should be agreed upon between the buyer and seller.