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In this area (varies a bit in different parts of the state), buyers typically put down $1K when the offer is accepted. When we sign the Purchase & Sale contract the deposit is generally increased to 5% of the purchase price. Recently, because the market has been so competitive, many buyers have started committing to larger deposits like 10% of the sales price in order to increase the attractiveness of their offer and stand out amongst all the other offers the seller has received. So, in a town like mine where the median sale price this year has jumped to about $790K the average deposit is between $39,500 and $79,000.
Here's the deal with earnest money - it's applied to the buyer's side at closing anyway, so the only time you lose is if you break the contract. In Texas we have an option period - can be anywhere from say, five days to two weeks or even longer in a few cases. The buyer "buys the option period" for a fee of $100. During that option period, the buyer can cancel the contract for any reason. I mean, the buyer can call up the agent and say, "The angel Gabriel came to me in a dream last night and told me not to buy this house," and the only thing the buyer forfeits is the option fee of $100. They get the earnest money back.
During the option period, the buyer gets the home inspections done and all that jive. THAT'S the time that you find out more about the condition of the house, and that's the time you need to back out, in the typical case, or renegotiate the terms.
I never put down earnest money on a house I don't intend to buy anyway, and the earnest money goes toward my end of the deal at closing, so I always put down an amount that's large enough to really get the seller's attention and let them know that I am serious and willing to put my money where my mouth is!
As a buyer I never put down more than $1,000. Although I have angered many people, I've never been turned down.
Have you ever purchased a home in a multiple offer situation?
Around here, I can assure you no one would take your offer seriously. The market in this area even in lean times moves fast enough that 99% of sellers would prefer to wait for the next offer.
Quote:
Originally Posted by KathrynAragon
I never put down earnest money on a house I don't intend to buy anyway, and the earnest money goes toward my end of the deal at closing, so I always put down an amount that's large enough to really get the seller's attention and let them know that I am serious and willing to put my money where my mouth is!
I think Kathryn sums up the whole thing right nicely here. If you're serious about buying the house, does it really matter how much deposit you put down?
If you're really qualified to buy at the agreed price...
does it really matter how much deposit you put down?
You may know you're qualified, but the seller doesn't know it at the time of the offer. Especially in multiple offer situations, or in a fast moving market, I think a generous earnest money amount sends the message, "We're liquid and ready to roll!"
I wouldn't ever put in an offer without a prequalification letter from my lender and a generous amount of earnest money. But then, I don't make offers on houses I'm not dead serious about, and I'm not trying to squeak into something with zero down and asking the sellers to pick up the closing costs either!
You may know you're qualified, but the seller doesn't know it at the time of the offer. Especially in multiple offer situations, or in a fast moving market, I think a generous earnest money amount sends the message, "We're liquid and ready to roll!"
I wouldn't ever put in an offer without a prequalification letter from my lender and a generous amount of earnest money. But then, I don't make offers on houses I'm not dead serious about, and I'm not trying to squeak into something with zero down and asking the sellers to pick up the closing costs either!
I want my offer to shine compared to the others.
Earnest money is so easy to protect in NC, it is really just flashing cash, more than real skin in the game, unless something goes badly wrong.
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