Here are some reasons why an initial deposit is required when buying a home:
Shows good faith: An initial deposit shows the seller that you are serious about buying the property and that you are willing to put some money on the line to show your good faith.
Locks in the deal: An initial deposit is often used to lock in the deal and take the property off the market, at least for a period of time. This gives the buyer time to perform their due diligence and secure financing for the purchase.
Protects the seller: An initial deposit can help protect the seller in case the buyer decides to back out of the deal without a valid reason. In such cases, the seller may be entitled to keep the deposit as compensation for the time and effort they have invested in the transaction.
Goes towards the purchase price: An initial deposit is typically applied towards the purchase price of the home. For example, if the purchase price of the home is $500,000 and the initial deposit is $25,000, the buyer would need to come up with the remaining $475,000 at closing.
It is important to note that the amount of the initial deposit can vary depending on a number of factors, such as the purchase price of the home and the local real estate customs. It is also important to carefully review and understand the terms and conditions of the deposit, including any contingencies and refund policies, before making the deposit.