Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Is this for real? It has been suggested that we give 20% of the purchase price within 3 days of making our offer. That much in Summit is a HUGE amount. We are able to squeak by and do it, but I want to know it’s legit, and actually expected/done in that area. We are currently in MA, where you give a 1K check.
You aren't giving money away here. It is a deposit which is placed in escrow. If you don't have 20% to put down, how are you going to qualify for a mortgage? Except first time home owners, mortgage companies in 2019 require 20% down.
For many years it has been 10%, but they can require 20% if they wish, you can just refuse, of course. In NJ, everyone uses a real estate attorney. You need to find one and have him/her advise you.
Summit, NJ is a very nice area, and they don't want to waste their time with people who can't qualify for a mortgage. Requiring 20% as deposit instead of 10% gives them a better class of more qualified buyers. It also prevents you from running around and putting $1K on 10 different houses to see which one works best for you.
An earnest deposit is not the down payment. An earnest deposit is submitted with or soon after your offer and it’s supposed to demonstrate to the seller that you are serious. If and when you close, the earnest deposit can be applied toward the down payment.
My earnest deposit 2 years ago for a condo in JC was only about $1500. 20% is ridiculous and risky.
Jersey City is a different real estate marketing than Summit, NJ.
My realtor called it a down payment, and the whole time, I understood it as the money you bring to the closing (whatever I get for selling my house minus my mortgage balance). Nope! Turns out they use that same “down payment” terminology to refer to the check you write to go along with your offer. It is made out to your own attorney, not the seller or their attorney. Apparently this IS the norm for these highly competitive areas. It’s crazy to me to know we can afford the mortgage payments on a 1.2+ house, but can’t get one because we won’t have the 20% cash til we close on our house (and we actually end up with more like 65%). So bizarre.
So this is what you do. You sell your house in MA, close on it, have the cash in the bank while you rent in NJ and shop for a home. People do this all the time who don't have the money for the deposit. The 20% goes into escrow and once "attorney review" has been completed and you set a closing date, that money in escrow gets released to the buyer.
20% isn't crazy. You want to buy in some places in NYC, they don't allow financing at all, it has to be all cash. They can set the terms for whatever they want. You work closely with your real estate attorney in NJ as the buyer, cause the seller has their own real estate attorney.
no it is not. Walk away or lower the offer if they want to do this BS. Why would you tie up $250K in a checking account for MONTHS when you do not need to
Why would you want to, to buy a house in Summit, NJ, that's why. I don't know anyone who has bought property there in the last 20 years that is sorry they did. It is not just on the train line, it has a major train hub in town making it very easy to commute to NYC. It has nice streets and low crime. Very good downtown. Very good schools. You get what you pay for. Chances are very good you aren't going to see your neighbor driving a beat-up pickup truck who drinks beer shirt-less on his porch when you get home. Just like everything else, you get what you pay for.
You get paid interest in the money while it is in an escrow account.
What is the perceived risk of writing a check that will be held in an attorney escrow account? I would consider that to be pretty secure.
The mortgage process takes 30-45 days so I suppose you would lose out on the interest you would otherwise earn if you had that in your savings account but other than that I don't see what's wrong with it if you had planned on putting 20% down anyway. It's not like the seller has access to the money.
No, we got paid interest while the deposit was in escrow. I don't know why are getting so worked up about not having access to the 20% while waiting for the house to close. When then house closes you aren't going to have access to that 20% either because that deposit is the requirement downpayment by mortgage companies in 2019.
It's not always refundable. If it's the buyer who is backing out of the contract, it can still depend on reason and what is written in the contract, but there is the risk that the buyer loses that money. In the case of the OP, I'd hope that their agent has a contingency written in for the sale of their previous home, along with any other reasons they may not end up buying.
Regardless, that's a very large amount to be considering for earnest. There are enough houses for sale in Summit, and it's a nice enough town that the buyer shouldn't feel pressured into more than they're comfortable with.
Their agent? Come on, real estate agents are useless. You work with your own real estate attorney to protect your interests.
I asked our real estate attorney at the time, and he said the only way I could actually lose the escrow money is if I just simply walked away from the entire thing and never communicated to anyone. No my attorney, not the seller, not the mortgage company, etc. and just left everyone hanging. He told me if at any time up to and including "attorney review" if I wanted to get out of the deal, all I needed to do was give him a phone call and that would end it. He has never had a problem. It doesn't even need to be contingent on inspection to get out of it, it could just be you decided not to buy that house. This is what the escrow is for to make sure you have the money and it is held until it is released back to the buyer or to the seller at closing.
If the OP doesn't know how to find a real estate attorney in NJ, contact one of the big title companies and ask them for a recommendation, because they know who are the better attorneys because they deal with them all the time.
You aren't giving money away here. It is a deposit which is placed in escrow. If you don't have 20% to put down, how are you going to qualify for a mortgage? Except first time home owners, mortgage companies in 2019 require 20% down.
Once our house sells (at closing), we would have more than 60% to put down. Our mortgage would be relatively low. But to be expected to put together 20% right when offering... that was new(s) to me.
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
