A good faith deposit is money you give to a landlord or seller before signing a lease or purchase agreement to show you are serious about the transaction
The deposit sits in a separate account while the landlord or seller reviews your application. If you move forward with the lease or purchase, the deposit usually goes toward your first month's rent, security deposit, or closing costs. If you back out without a valid reason, or if the landlord rejects you, the money may be kept or returned depending on what the agreement says.
Good faith deposits are most common in competitive rental markets where landlords want assurance that applicants will follow through. They are also used in home sales, though the mechanics and protections differ. The amount varies widely — anywhere from $200 to several months' rent — and is negotiable between you and the landlord or seller.
Key Takeaways
- A good faith deposit shows the landlord or seller you intend to complete the transaction and is held separately from your security deposit.
- The deposit amount is negotiable and should be written into the lease or purchase agreement, including what happens to it if the deal falls through.
- If you are rejected after submitting a good faith deposit, the money should be returned unless the agreement explicitly states otherwise.
- Some states and localities have laws protecting good faith deposits; check your local housing authority or tenant rights organization for rules in your area.
- Never send a good faith deposit without a written agreement that spells out the terms, the amount, and the conditions under which it will be returned.
How a good faith deposit works in a rental
When you find an apartment you want to rent, the landlord may ask for a good faith deposit before they process your application. You write a check or transfer money to the landlord or their agent, who holds it in a trust account. The landlord then runs a background check, verifies your income, and contacts your references.
If the landlord approves you and you sign the lease, the good faith deposit is credited toward your move-in costs — typically your first month's rent, security deposit, or both. If the landlord denies your application, the deposit should be returned to you in full. If you decide not to rent the apartment after the landlord approves you, the landlord may keep the deposit as compensation for taking the unit off the market.
The exact terms depend on what you and the landlord agree to in writing. Some landlords use a standard form; others negotiate case by case. The key is that the agreement must be in writing and must state clearly what happens to the money under each scenario.
Good faith deposits in home purchases
In real estate sales, a good faith deposit is called earnest money and works similarly but with more formal protections. You submit earnest money when you make an offer on a house, usually 1 to 3 percent of the purchase price. The money goes into an escrow account held by a title company or attorney, not the seller.
If your offer is accepted and you move forward with the purchase, the earnest money is credited toward your down payment or closing costs. If the seller rejects your offer, the money is returned. If you back out for reasons not covered by the purchase agreement — such as changing your mind — the seller may keep the earnest money. However, if you back out because the inspection reveals major problems or the appraisal comes in low, the money is typically returned because those are standard contingencies in most purchase agreements.
Earnest money is governed by state law and real estate contracts are more detailed than rental agreements. A real estate attorney or agent can explain the specific protections in your state.
What to include in a written agreement
Before you hand over any money, get a written agreement that includes:
- The amount of the deposit and the date you are submitting it.
- The property address and the lease start date (or offer details in a purchase).
- What happens to the deposit if the landlord or seller approves you.
- What happens to the deposit if you are denied.
- What happens to the deposit if you withdraw your application or offer.
- The account where the money will be held and who holds it.
- The timeline for returning the deposit if it is not credited.
- The signature of both you and the landlord or seller.
Do not rely on a verbal promise. Landlords and sellers change their minds, and without a written record you have no way to recover the money if a dispute arises.
State and local protections for good faith deposits
Some states and cities have laws that govern good faith deposits in rentals. These laws may require the landlord to hold the money in a trust account, return it within a certain number of days, or provide written notice of what happened to it. A few states treat good faith deposits the same as security deposits and require the landlord to pay interest or return them within 30 days.
Other states have no specific rules for good faith deposits, which means the agreement you sign is the only protection you have. Before you submit a deposit, contact your local housing authority, tenant rights organization, or city housing department to learn what rules apply in your area. You can also search online for "[your state] good faith deposit laws" or "[your city] rental deposit protections."
If a landlord refuses to return a deposit that should have been returned under state law or your agreement, you may be able to file a complaint with your housing authority or sue in small claims court. Keep copies of all written agreements, receipts, and correspondence with the landlord.
Red flags and how to protect yourself
Be cautious if a landlord asks for a good faith deposit before you have seen the property in person, signed any agreement, or had time to review the lease. Scammers sometimes collect deposits from multiple applicants for the same apartment, especially in hot rental markets. Verify that the person asking for the deposit is actually authorized to collect it — call the property management company or landlord directly using a phone number from their official website, not one provided in an email.
Never send money via wire transfer, gift card, or cryptocurrency. Use a check, bank transfer, or credit card so you have a record and can dispute the charge if needed. Ask for a receipt that includes the deposit amount, the date, the property address, and the name of the person or company holding the money.
If you are unsure whether a request for a good faith deposit is legitimate, contact a local tenant rights organization or your city's housing department. They can tell you whether the practice is common in your area and what protections you have.
Frequently Asked Questions
Is a good faith deposit the same as a security deposit?
No. A security deposit is held throughout your tenancy and returned at the end if you do not damage the apartment. A good faith deposit is submitted before you sign the lease and is credited toward your move-in costs or returned if the landlord denies you. Some landlords ask for both.
Can a landlord keep my good faith deposit if they approve me?
No, if the landlord approves you and you sign the lease, the good faith deposit must be credited toward your first month's rent, security deposit, or other move-in costs. The agreement should state this clearly. If the landlord tries to keep it as a separate fee, that is not how good faith deposits work.
What if I change my mind after submitting a good faith deposit?
It depends on what your written agreement says. If you withdraw before the landlord approves you, the deposit is usually returned. If you withdraw after the landlord approves you and you have signed the lease, the landlord may keep the deposit as compensation for taking the unit off the market. Always read the agreement before you submit the money.
How long does it take to get a good faith deposit back?
State law varies, but most require the landlord to return the deposit within 7 to 30 days if it is not credited toward your move-in costs. Check your state or local housing authority website for the specific timeline in your area. If the landlord does not return it within that period, you may file a complaint or pursue the matter in small claims court.
Can I negotiate the good faith deposit amount?
Yes. The amount is negotiable between you and the landlord. In a competitive market, landlords may ask for more; in a slower market, they may ask for less or waive it altogether. If the amount seems high or unreasonable, ask the landlord to lower it or explain why it is necessary.