Five Dollar Bill LincolnIf you are planning to purchase a home in Silicon Valley, most likely you’ll be working with a real estate professional and together you will use either the California Association of Realtors (CAR) purchase agreement form or the Peninsula Regional Data Source contract (PRDS). Both of them begin with the same basics: who is making the offer, what property is involved, how much is being offered to the home owner and how much is being put down or put into escrow as an initial deposit or good faith deposit.

What is the initial deposit in real estate contracts?

The initial deposit, or good faith deposit, is the amount of money which the buyer puts into the escrow account at the beginning of the transaction. It is usually given in a personal check, which is cashed within a day or two of being brought to the escrow holder (in our area, that’s a title company – in southern California, they tend to use escrow companies or even one of the real estate brokers).  Some home buyers wire in the funds. Either way, unless the boilerplate is changed, the money is due within 3 business days of contract acceptance.

How much is the initial deposit?

In Santa Clara County, or the San Jose area, most often the initial deposit is 3%.  I have occasionally seen offers with as little as 1% (and years ago, as low as $1,000) on them but have not seen sellers want to take those offers.  They want to know that the buyer they get into contract with “has a little skin in the game”.

Why is an initial deposit needed?

The reason for the good good faith deposit is so that you’ve put money at risk should you default. Defaulting is not just leaving with cause during allowed timeframes, but something much worse, leaving after you’ve fully committed (or other breaches of contract).

Why three percent?  The 3% is tied to liquidated damages and the maximum limit for that is 3%.

Some real estate trainers encourage aggressive buyers (or those in multiple offer situations) to put more than 3% down to make the point that they are serious enough to tie up more money in escrow – even if the liquidated damages clause keeps anything over 3% from ever being at risk in case of a default.  It does get the seller’s attention!

Is the initial deposit handled differently if it’s a short sale?

Short sales are mostly a thing of the past here now, but this question arises so let’s talk about it. Usually buyers will not put any money into escrow until there’s bank approval for the short sale (and it’s a sure thing that they CAN buy the house).  But some listing agents are now demanding money in escrow – and also that the buyer have inspections done – prior to bank approval.

My personal opinion is that paying for inspections and appraisals without the lender approval puts the buyer in a terrible position of putting everything at risk (money on inspections, appraisal etc.) without the assurance that the seller will be able to close escrow.  So I would advise against this practice if I were representing the buyer since it’s a potential waste of money.

That said, I completely understand that many short sale sellers have been burned in the past by buyers who put offers on multiple houses at once, which of course is unethical since they were incapable of buying all of them.  The idea was that they’d tie up several homes and the first one with an approval would win.  But by keeping the others knotted up, they literally moved those other sellers closer to foreclosure. Terrible.  So I understand and support putting some money in escrow with short sales.  Often suggested: 1% upfront, 2% more when they get bank approval.  Each sale is different though, so talk with your Realtor about it.

  1. 4 beds, 3 baths
    Home size: 1,918 sq ft
    Lot size: 4,639 sqft
  2. 3 beds, 2 baths
    Home size: 1,176 sq ft
    Lot size: 5,980 sqft
  3. 4 beds, 2 baths
    Home size: 1,466 sq ft
    Lot size: 6,459 sqft
  4. 3 beds, 2 baths
    Home size: 1,530 sq ft
    Lot size: 7,287 sqft
  5. 4 beds, 3 baths
    Home size: 2,062 sq ft
    Lot size: 4,909 sqft
  6. 3 beds, 3 baths
    Home size: 1,470 sq ft
    Lot size: 3,214 sqft
  7. 3 beds, 2 baths
    Home size: 1,000 sq ft
    Lot size: 6,028 sqft
  8. 4 beds, 2 baths
    Home size: 1,602 sq ft
    Lot size: 6,059 sqft
  9. 3 beds, 2 baths
    Home size: 1,328 sq ft
    Lot size: 7,048 sqft
  10. 3 beds, 2 baths
    Home size: 1,137 sq ft
    Lot size: 5,871 sqft

See all Real estate in the city of San Jose.
(all data current as of 5/24/2018)

Listing information deemed reliable but not guaranteed. Read full disclaimer.


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Mary Pope-Handy
Sereno Group Real Estate
214 Los Gatos-Saratoga Rd
Los Gatos, CA 95030
408 204-7673
Mary (at)
License# 01153805

Selling homes in
Silicon Valley:
Santa Clara County,
San Mateo County, and
Santa Cruz County.
Special focus on:
San Jose, Los Gatos,
Saratoga, Campbell,
Almaden Valley,
Cambrian Park.
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Mary’s Blog Awards
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Top 25 real estate blogs 2016
2016: Personal Income's list of top 25 real estate blogs.

Best Realtor blog award
2016: Coastal Group OC's list of best Realtor blogs

The 2009 Sellsius list of top 12 women real estate bloggers
2009: Sellsius list of top
12 women real estate bloggers

Mary Pope-Handy's Live in Los Gatos blog won the 2007 Project Blogger contest, sponsored by Inman News and Active Rain

2007: Mary Pope-Handy and Frances Flynn Thorsen win the Project Blogger Contest for Mary's Live in Los Gatos blog. The contest was sponsored by
Active Rain and Inman News.

Non blog award

Best real estate agent in Silicon Valley from the San Jose Mercury News poll of readers in 2011
"Best real estate agent
in Silicon Valley"

2011 readers' poll,
San Jose Mercury News