What is good faith money?

Get Up and Be Your Own Hero
2 min readSep 27, 2024

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Photo by Ján Jakub Naništa on Unsplash

Good faith money is money that the buyer uses to prove to the seller that he intends to complete the transaction.

In real estate, good faith money is also called earnest money.

This is not the same as a down payment

For example, let’s say you want to buy a house listed for $10,000.00.

To show that you are serious and ready to close the deal quickly

You provide a goodwill amount of 1,000,000.

When the deal closes, $1,00,000 is applied toward the sale price (meaning you won’t pay a goodwill amount on top of the home price; You will simply pay the money).

It is important to note that the buyer does not owe the seller goodwill money.

The buyer pays the money in good faith to a third party, such as a real estate broker, real estate attorney, escrow company, or title company, and receives a receipt.

The third party must not release the goodwill money to the seller until the transaction closes, which means that if the deal falls through, you will likely get his goodwill money back.

Photo by Adam Papp on Unsplash

Depending on supply and demand, the amount of goodwill money may vary as a percentage of the final price.

Both the seller and the buyer should specify the terms of the goodwill money in writing.

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