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Around here, only new construction can command those kinds of 5-10% earnest money payments. For an resale, it's usually it's about 1% - more if it's a multiple offer situation.
I'm a loan processor in Chicago. I usually see an initial deposit of $1,000 and then after attorney approval, especially on higher value homes, I do often see a 2nd deposit bringing it up to a total of 5% of the purchase price. I don't usually see 5% right off the bat.
Many times a hefty deposit masks other messy areas of an offer. If you want a property, bid on it like you really want it. In the same breath, don't try this (large EMD) with a FSBO without agent representation or in a case of dual agency. (Latter = my personal feelings on the matter).
Many times a hefty deposit masks other messy areas of an offer. If you want a property, bid on it like you really want it. In the same breath, don't try this (large EMD) with a FSBO without agent representation or in a case of dual agency. (Latter = my personal feelings on the matter).
Good point.
Contracts should always designate a responsible escrow agent, and clear and specific terms of escrow of deposits, how held, how disbursed, how refunds can be allowed.
Never make out an EMD to the seller and then give that EMD to that seller!
$40k is an extraordinary amount. I could see $10k, but $40k? We purchased a home in the low $800s in CA and the good faith deposit was $10k. Do this: During the inspection period, ask for something unreasonable that way you have an out should you change your mind when the seller's reject your unreasonable repair request.
Here's an example of what I did. I placed an offer on a home (home #1) offered as a short-sale. I was in second position behind a cash offer. Becuase I expected the party in the first postion to complete the sale, I placed an offer on another home (house #2) and gave a $5k earnest deposit. During the inspection period on the second home, I asked for several reasonable fixes and one that I know they would not do. The home was Spanish style with a roof that had roof tiles with exposed mortar. Some of the exposed mortar that caps the row ends was cracked--a common issue that is purely cosemetic. The seller rejected making the repair (this is my out).
Of course, the deal on the first house collapsed moving me to first position. I was one day outside of my inspection period for house #2. So, my money went hard; however, because the seller for house #2 rejected my repair request, I was able to have my earnest money returned even though my deposit went hard...In essence, the seller rejected my offer allowing me to walk away unharmed and move on house #1.
Moral of the story: Always have an out if possible.
Is real estate like love and war - all is fair? I only ask because that seems a bit underhanded. Of course, I'm new to this real estate game, so genuine question.
Is real estate like love and war - all is fair? I only ask because that seems a bit underhanded. Of course, I'm new to this real estate game, so genuine question.
Actually, a larger deposit is warranted in cases where the buyer demands a discount based on their "all cash" or conventional financing- it's calling their bluff, if the buyer really does have the necessary cash & actually intends to close in 30 days or less, it's no big deal to lay out more earnest money (just to prove that they actually have those funds available.). I can't tell you how many "golden buyers" turned out to be duds when they actually had to come up with the cash - only when you ask about a more appropriate deposit do you find out the money is an (expected) gift, or a mom-loan, or in a super-secret trust, etc.
Further, every property has carrying costs.. I can just imagine the property taxes on an $800k property- somebody has to pay that & the seller can't sell to anyone else while they're under contract, even if they're under contract with a flake.
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