Which term describes the amount required as a good faith deposit towards a real estate transaction?

The term that describes the amount required as a good faith deposit towards a real estate transaction is earnest money. This deposit is typically made by the buyer to demonstrate their serious intent to purchase the property. It shows commitment to the transaction and assures the seller that the buyer is genuine in their offer. If the contract goes through, the earnest money is usually applied towards the down payment or closing costs. If the deal falls through due to contingencies outlined in the contract, the earnest money is often returned to the buyer.

Other terms, such as down payment, security deposit, and financing fee, refer to different aspects of a real estate transaction. The down payment is the portion of the purchase price that the buyer pays upfront, often expressed as a percentage of the total price, rather than a separate good faith deposit. A security deposit typically refers to money held by a landlord to cover potential damages or unpaid rent, primarily in rental agreements. The financing fee relates to costs associated with obtaining a loan, distinct from the upfront commitment represented by earnest money.