Good faith deposit

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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.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Good Faith Deposit

1. In municipal bonds, a small amount of money, usually less than 5% of an issue, that underwriters give to the issuer in exchange for the right to place part of the issue. A good faith deposit is a sign that an underwriter has a vested interest in placing the issue and will therefore act vigorously on behalf of the issuer.

2. In securities, a small amount of money from an order that a brokerage requires a new client to deposit in exchange for filling the order. The good faith deposit ensures that the new client is serious about the order and will be likely to settle or make delivery when the time comes. This is done to reduce the risk to the brokerage when it takes a new client. It is also called earnest money.

3. See: Initial margin amount.
Farlex Financial Dictionary. © 2012 Farlex, Inc. All Rights Reserved

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.
Wall Street Words: An A to Z Guide to Investment Terms for Today's Investor by David L. Scott. Copyright © 2003 by Houghton Mifflin Company. Published by Houghton Mifflin Company. All rights reserved. All rights reserved.

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.

Dictionary of Financial Terms. Copyright © 2008 Lightbulb Press, Inc. All Rights Reserved.
References in periodicals archive ?
First off, although the check that accompanies a purchase offer may eventually wind up as part of the down payment, it is known as a deposit -- a good-faith deposit or an earnest money deposit.
* Benchmarked good-faith deposit: A significant good-faith deposit should be required as a sign of commitment from the buyer.
Another way to signal you are a serious buyer is by putting down a large, good-faith deposit. A 2 percent to 4 percent escrow deposit is common.
"When customers ask for a concession to suspend required payments, we in turn ask for a good-faith deposit that acknowledges the importance of and commitment to resuming payments in the future," she said.
The bill was flawed but represented a decent start, just as the recent health care reform bill represented a good-faith deposit on what must eventually be more far-reaching reforms.
Once you've accepted an offer letter and paid a good-faith deposit, if you haven't yet brought up points that are of key importance at the earliest stages, these points will be much more difficult (although not necessarily impossible) to change later on in the process.
The parties have agreed to use a previously issued $350,000 good-faith deposit to prepare and to move the leased equipment to GeenMan's Tennessee plant.
Property owners battled, while spending the district's $48 million good-faith deposit to pay down debt.
Even if you did say yes and they wrote you a check as a good-faith deposit, you couldn't hold them to it.
Even if you agreed in the presence of witnesses to take their bid, and even if you accepted a good-faith deposit to bind the deal, you couldn't hold them to it if they changed their minds later.
If their purchase contract contingency deadlines aren't met, and they've already canceled their rental lease, they could forfeit their good-faith deposit and end up with no home at all.