What Terms Should I Insist on for a Reservation Deposit to Protect My Due Diligence?

If you decide to pay a reservation deposit, make sure the terms are explicit and protect your due diligence. Key safeguards include: a written agreement that clearly identifies the property, the price, the deposit amount, and payment deadline; a defined timeframe for independent lawyer review (with a possible extension if more time is needed); a strong subject-to-lawyer-review clause stating that the deal depends on clear title, ownership verification, and satisfactory inspection results; explicit refund conditions if title or due-diligence checks fail; whether the deposit is refundable or credited toward the purchase price; an escrow or neutral third-party holding arrangement to protect both sides; and a clause detailing who pays transfer taxes and fees if the deal does not proceed. Also specify the documents the seller must provide during due diligence and set defaults or remedies if timelines slip. Finally, avoid high-pressure language and obtain written responses to all critical checks before moving ahead.