Deposit checks – What you need to know.


When you decide to purchase a home, one of many things that will be asked of you is a deposit check. Over the years, buyers have often expressed confusion on the manner, purpose and process surrounding these advance payments. In the hope of educating the buying public ahead of time, here’s a primer.

WHO needs to write a deposit check? Every buyer does, regardless of the purchase price, type of financing, date of closing, etc.

WHAT amount does it have to be? When a house is first listed and put into the MLS by an agent, they specify the amount the seller or agent would like to receive as a deposit. Do you, the buyer, have to give that exact amount? No. It could be more or less and there are a number of circumstances that would lead a buyer agent to suggest a higher or lower amount. Depends on the scenario. Trust your agent.

WHEN is the check written/given? Normally at the time you write an offer, you will also write the deposit check. Before email, the physical check would be hand-delivered to the listing agent. If the deal came together, they’d keep the check and if not, it was returned.

WHERE is the check kept until the closing? It will not be kept in it’s paper form. I cannot stress this enough! When your offer is accepted, or your counter-offer is agreed upon, your check WILL BE CASHED! Please do not write a check if the funds aren’t there. The listing company cashes the check and it’s deposited into a special “escrow account” until your closing day. Then, at closing, you are issued a credit for the full amount and it’s subtracted from the balance you owe.

WHY do buyers need to write a deposit check to begin with? Mainly to show the seller that you’re a serious buyer and not just tire kicking. If your hard-earned dollars are at risk, there’s less chance of you terminating the deal for a frivolous reason. You would still have available to you the contingencies the contract allows for.

WHO keeps the money if the sale doesn’t happen? It depends. If the buyer backs out of the sale for reasons of a contingency, like the home inspection or mortgage, then the buyer automatically gets it back. If there are no contingencies, and the buyer just got cold feet the day before closing… then there will be some discussions and potential legal actions on the matter. The buyer may get it back, but may not. Your agent or attorney will advise you.