The good faith check is money that is put forward to show that the buyer is serious about purchasing the property.
Once a contract is accepted, the good faith money is deposited into the listing or selling broker's escrow account, depending on what is agreed upon in the contract. There is no interest accumulated on the money.
A good faith check can be a personal check from the buyer's checking account.
It is important to keep in mind that the money is actually deposited, meaning that it will be money coming directly from the checking account. The money will be either returned at closing or applied to the costs associated with the closing.
If the contract falls through on inspection, the buyer receives the good faith money back after the release document is signed. However, the good faith money would be forfeited to the seller if a buyer backs out past the inspection period (there can also be other legal ramifications).
The amount can vary, typically depending on the price of the property. Some situations (e.g. new construction) require a good faith deposit that is 1% of the purchase price. That means that a $250,000 property would need a good faith check of $2,500. The 1% is not a hard and fast rule, but it is important to note that a seller can counter an offer, requesting a higher good faith amount if they so choose.
If you have any other real estate questions or needs, please let me know.
Matt Gatewood
Realtor®
Keller Williams Louisville East
502-594-6582