What is the purpose of submitting a deposit when applying for a rental apartment?

Some management companies / landlords require a deposit when submitting an application for an apartment.  The deposit can be several hundred dollars to one month’s rent and is used to ensure that the applicant is serious about moving forward with the application.  If the tenant is rejected, the deposit is generally returned.  However, if the tenant ends up being approved, the deposit is non-refundable and is normally applied to the first month’s rent or security deposit.

Length of Application Process
Since a deposit is designed to be non-refundable if an applicant is approved, it is wise to find out how long the approval process will take (i.e. how long your deposit is at risk).

Putting An Apartment On Hold
Some mgmt cos / landlords will allow prospective renters to put down a deposit in order to hold an apartment for a specific period of time (e.g. 24 hours), so that no other individuals can gain access.  This allows the applicant additional time to compile the full application and paperwork for review.

Broker Deposit
Similar to mgmt cos / landlords, some real estate agents require a deposit when a client submits an application to ensure that the client is committed to the apartment if he/she is approved.  If you are submitting a deposit to an agent, make sure you understand the terms of such submission and receive a minimum of a payment receipt.

Deposit Agreement / Receipt
When submitting a deposit, you should always obtain a receipt and/or sign a deposit agreement.  Getting proof of payment is important, but understanding and documenting when a deposit is refundable vs. non-refundable is essential.  Most deposits are designed to lock you in (non-refundable) if you submit an application and are subsequently approved.  A deposit agreement should adequately explain the details of submitting a deposit and lay out each situation during the process.