These contracts are written to heavily reduce a buyer’s risks. For example, when a buyer makes an offer to purchase any kind of real estate, and a CAR purchase form is used, an initial good faith deposit accompanies the offer. The amount of the good faith deposit a buyer puts forth is based on the buyer’s and seller’s discretion. Upon acceptance by the seller of the buyer’s terms the good faith deposit, made payable or wired to an escrow company, and is held in escrow throughout the entire escrow process.
Even though the deposit gets ‘cashed’ the deposit is not at risk until such time as the buyer states in writing that he/she intends to fulfill the obligation of the purchase within a time frame specified by the buyer in the contract. It is at that time the buyer is then required to make their deposit ‘hard’, meaning, if the buyer backs out of the deal from that point on, whatever deposit amount was agreed upon, is the seller’s money.