The deposit: The deposit is generally the seller’s sole relief if the buyer breaches the contract. As the seller, be sure the deposit will cover your carrying costs until the closing date plus time to re-market the property. Back up contracts can reduce your exposure to a buyer’s default. Some sellers even use “first to close contracts” in which the property is sold to the first buyer to make it to the closing table. Note: that if a seller executes multiple “first to close” contracts be sure the buyers are well aware of it.
As the buyer, never pay a deposit directly to the seller, as it will not legally be in escrow, and you are much less likely to ever recover it. Also realize that your recovery of your deposit, even if legally justified is often objected to by the seller, requiring expensive arbitration’s and litigation - paid for out of your deposit. So the buyer should attempt to minimize the size of the deposit. The initial deposit made at the time of contract should be minimal. Only after the buyer has performed his professional inspection of the property, which may authorized him to rescind the contract, should the buyer make a substantial deposit.
You may see “deposit by note” on a contract. This is very much the same as no deposit at all