What Is a Security Deposit

Apartment building in Parkside neighborhood in Hollywood, FL
Apartment building in Parkside neighborhood in Hollywood, FL

A security deposit in real estate is an agreed amount of money held in trust.

One party gives money to the other party in order to secure a real estate transaction.

A security deposit can be given buy a buyer to a property seller as an initial part-payment in a purchasing process. It is done to prevent the seller from selling an item to someone else during an agreed period of time while the property buyer verifies the suitability of real estate, or arranges finance of it. This way the property seller knows that the buyer is serious in buying the real estate. In this scenario, a security deposit is also called earnest money payment.

Also, security deposit is paid when signing a rental agreement. The person renting a property gives security deposit to lanslord. This way the property is protected against default by the tenant. SEcurity deposit is also used to repair any damage done to the rental property by the person renting it.