Question on deposits from cash buyer

[Shubham Aggarwal]

When assigning a contract to a cash buyer, I assume the cash buyer will put up a deposit. I have a few questions about this process. Let me illustrate an example:

I (the wholesaler) go under contract for a property and put down a $5,000 deposit. I have a 10-day inspection period. On day 5, I reach an agreement with a cash buyer and we execute an assignment of contract. I request a deposit of $5,000 from the cash buyer. My questions below:

1. Who does the cash buyer make the deposit to? To the escrow company or to myself directly? I assume the escrow company but wanted to confirm.

2. How long should I give the cash buyer to make the deposit? 1 day, 3 days, 3 business days. What is typical?

3. If the cash buyer makes the deposit immediately, the escrow company will now have $10,000 in deposits. Will my $5,000 deposit be refunded back to me immediately? Or do I receive it back at closing?

4. Should the cash buyer's deposit be refundable or non-refundable? I assume their deposit will be refundable through the 10-day inspection period, just as mine was. I see a lot of wholesaler ads asking for non-refundable deposits, which is why I am wondering.

5. Does the cash buyer's deposit have to be the same as mine? Or can it be greater? In this example, can I ask for a $10,000 deposit?

I know this a bunch of questions but I cannot find any online sources that explain this so any insight would be very helpful. Thank you!

[Shubham Aggarwal]

Quote from @Katlynn Teague:

Shubham,

1) The deposit would go to the closing attorney

2) If your buyer is ready to sign contracts, I would request the deposit immediately. 

3) You will receive it back at closing 

4) Deposits should always be non-refundable. This protects YOU, in the event your buyer backs out. 

5) The deposit can be whatever you want it to be! 

Happy Wholesaling! 

Thank you so much! This provides a lot of clarity. I have a follow up question regarding #4. Let's say the cash buyer made a $5,000 non-refundable deposit. In the event the cash buyer defaults, I assume the seller will receive my $5,000 deposit and I will receive the cash buyer's $5,000. This way, I am made whole and have no risk. I believe this is what you meant regarding protecting myself, but just want to confirm.

And thinking out loud now, if my deposit is $5,000 with the seller and I request a $10,000 deposit from the cash buyer, I guess I would make $5,000 if the cash buyer defaults?