Good faith deposit

Good faith deposit

Used in the context of commodities. Refers to the initial margin account deposit needed when buying or selling a futures contract; approximately 2%-10% of the contract value.
Used in the context of securities to describe the deposit required by securities firms engaged in transactions on behalf of a new client.
Also used to refer to the deposit with a municipal bond issuer by firms competing for the underwriting business.

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good faith deposit

1. A sum of money required of an investor who is placing an order when that investor is not known to the brokerage firm. A good faith deposit ensures that the customer will follow through with proper payment for a buy order or with delivery of securities for a sell order.

2. A sum of money deposited by competing underwriters of a new municipal bond issue. The deposit is a relatively small proportion (usually under 5%) of the value of the issue being underwritten.

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Good faith deposit. A good faith deposit is a sum of money provided by a buyer to a seller, which demonstrates the buyer's intention to purchase.

For instance, if you've decided on a home you want to buy, you generally make a good faith deposit to support your bid.

A good faith deposit, also called a binder or earnest money, is usually a fixed amount that's standard in the community where you're buying. It's different from a down payment. That's a larger cash payment, figured as a percentage of the purchase price, which you make when you sign the contract to purchase the property.

If you and the seller can't agree on the terms of the sale, you generally get your good faith deposit back.