This is a question that I am asked by clients regularly, and in the course of preparing an offer, we discuss the amount, purpose and eventuality of the deposit.
In most cases, the deposit is made as a sign of good faith, and on the closing date when the property changes hands, the deposit amount is taken off of the purchase price. It all happens in the background by the lawyer and is outlined on the statement of adjustments that the lawyer prepares.
However, what happens if the agreement doesn't close? In summary linked to below, the Purchase Agreement had a deposit of $100,000. The Buyer failed to close the deal on the closing date, and the Seller proceeded to find another party to buy the property. The court decided that the Seller would also get the deposit, since the Buyer broke the contract by not closing the deal.
This is the sort of issue that a Buyer needs to be clear about. Discuss the purpose of the deposit and what happens with it in various scenarios with your Realtor prior to the offer being submitted!
Click below for the article:
http://www.remonline.com/legal-issues-deposit-forfeiture/