When a buyer chooses to place an offer on a home for sale, a deposit is made towards the purchase of the home with the offer. The deposit is not paid directly to the seller but rather it is held in a special account pending the completion of the agreement. This deposit is deducted from the agreed upon sale price thereby reducing the total amount owing to the seller. Since the money is typically not a large amount and the duration it is held is relatively short, interest is not always paid but this is negotiable.
The size of the deposit is relative to the buyer and the seller meaning that, a large deposit will indicate to the seller the seriousness of the buyer and may play a part in negotiation. The down side to a large deposit is that if the transaction does not close the buyer may not get their deposit back until the matter is resolved which could impact their ability to move forward on a different home. In some instances the buyer may even forfeit their deposit although this is a small percentage of the time.
Buyers should always try to minimize the size of their deposit to protect themselves while the seller should always ask for as large a deposit as possible to ensure they buyers are truly commited to this deal. Once a seller enters into an agreement discussion with a buyer, other buyers must wait, if they really want the property or, move along so it's important to the seller the buyer demonstrates commitment or they may lose other interested buyers or extend the time required to sell. Too low of a deposit may inidicate to the sellers the buyer is not commited.
Each situation is unique and your real estate representative is skilled in these matters and can provide guidance in what is the right amount for you.