Uh, $1000 ain’t even close to 1% in these parts, Harry. Suggest another percentage, not a dollar amount.
“Good faith” was only $100 on my house. And even that was a check, which never saw a bank.
Good faith less than 1% is hard to take seriously in Indianapolis. It’s just the way the market is. We were interested in three houses that were sold between the time we scheduled an appointment and the day of the appointment. (Yes, that is legal–we weren’t shown the houses.)
I do not recommend consulting a realtor about properties that he or she lists. A listing (seller’s) agent is required by law to represent the interests of the seller above all other interests, within the limits of the law. That means that nothing can be lied about, but the listing realtor is prohibited from volunteering any information that might give the buyer an advantage.
The typical process is that after you decide you want to buy it, you make an offer, usually embodied in a one page or so form, and include say $1,000 as earnest money. At this point, it’s good to be pre-approved for a mortgage by a bank, because it will make the seller more likely to accept your offer.
If they do accept, then (as spelled out in the form), then you’ll have something like a week or two to get an inspection done and sign a purchase and sale agreement. With the results of the inspection, you can now negotiate a final price and/or repairs that must be made. As long as the inspection turned up a real issue, you can also back out and get your earnest money back. Once the offer is accepted, the seller CANNOT back out, even if somone else offers them more money. (And if they try to, you can sue them big time).
The purchase and sale agreement is the real deal, and will need a bigger deposit, perhaps 10% of the final price; it’s also not something you can back out of in any way. You’ll formally apply for the mortgage after you have the P&S, and close 6 weeks later or so. If for some reason the mortgage doesn’t go through, the deal is off, which is why a seller likes to see that you’re preapproved.
Anyway, I would get a lawyer or other professional (NOT the seller’s agent) to take you through it if it’s your first time buying. Shouldn’t cost too much for a straightforward transaction, but could save a lot of trouble (especially if the seller is doing it themselves, in which case there’s one less person making sure i’s are dotted and t’s crossed).
“(especially if the seller is doing it themselves, in which case there’s one less person making sure i’s are dotted and t’s crossed)”
Says Quercus, which I think is as important a reason to use a pro as any other. The seller is doing his own sale because he’s tight (cheap), and wants to avoid fees. Nothing wrong with that, but if he knows anything about the process, that puts you at a tremendous disadvantage.
BTW; if you really can’t afford the fee, you probably aren’t ready to buy. Home ownership can be expensive, especially early on. Ever had a water pipe burst at 3AM? Owning your own home is also a great feeling, so good luck. 
In CA, the sale is usually (always) contingent on the house clearing an inspection, with the buyer submitting a list of things from the inspection that they want fixed, and the seller deciding what things they will fix.
Houses fall out of escrow all the time, for various reasons- financing problems, inspection problems, etc.
I have never needed a lawyer, but have always used a competant real estate agent to represent me. He handles all the scheduling of inspections, etc, has me sign the right things at the right time, etc. I would NEVER do it on my own, either buying or selling.