Profile picture for franklinfam

Making an offer and entering into contract with a seller

when making an offer and entering into a contract, I was told I need to also submit a check that will later be put towards my down payment or closing cost. Is this check for a set amount or any amount that I decide?

  • January 10 2010 - Greensboro
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Answers (7)

Profile picture for sunnyview
I think the point about earnest money is important. I would not allow a private seller or their broker to hold earnest money if at all possible. Instead, I would prefer to put the deposit amount and the contract spelling out how you get your money back if the deal falls apart was with an escrow company. Escrow companies are paid to be impartial and to follow the contract. If the contract is clear and they have the money, in most states you can get it back with a minimum fuss if the deal falls apart. Check with the escrow company in your state and see if that's how it works where you are.
  • January 13 2010
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Profile picture for The LaPeer Team
What jkonstant says is very good advice. I'm seeing more and more buyers and sellers refusing to sign over the earnest money if the deal goes bad. A lot of banks who are holding foreclosures have the buyers sign the release when they sign the contract. That way they don't even have to ask for the release.
  • January 12 2010
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Be warned. Your contract may or may not be clear regarding under what circumstances you will get it back if things don't work out. Even if it is clear and you are legally entitled to it's return, the seller will have to agree in writing. It is not an automatic thing. If the seller disputes it's return to you, you may end up in court in order to get it back. How much to put down is normally what is customary in the area and what you cab afford to be without for a while if things don't work out and the seller refuses to release the money. Check with whomever will be holding it t(escrow company, broker, etc) to clarify the laws and verify if and how the money might be held or returned. Oh and ask your agent to see a copy of the release form. I think most state's forms have a place for the real estate brokers to sign, because they too can lay claim to all or part of it.

  • January 11 2010
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Profile picture for The LaPeer Team
I tell my clients that the earnest money amount is aproximately 1% of the sales price. Of course, this is negotiable. However, if you are truly serious about the property and want to convey this to the seller, don't try to undercut the earnest money. Just make sure all of your bases are covered if something were to go wrong; you will want your earnest money back.

Here in TX, we don't have a second amount due after the contract is accepted. Check with your agent and see what you need to do in your state.
  • January 10 2010
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It's regularly referred to as your Earnest Money and a typical amount is at least $500-$1000.  It is also held in escrow and used as downpayment on the purchase of your new home.  Your contract may list an event that will allow you to receive it back. 
  • January 10 2010
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Profile picture for Ofe Polack
It is apparent that you are not working with a buyer agent who would have advised you about how to place an offer that protects your interests in the transaction.  You may still be in a position to seek advice from a buyer agent.  A check is attached to the offer, the amount of the check depends on the price of the property.  The deposit is supposed to go into an escrow account and remain there until closing.  The purchase and sale agreement explains under which conditions you may get your money back.    
  • January 10 2010
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Typically the check could be for $1000.  The amount could vary and depend on the price of the property you intend to purchase.  This is best discussed with the agent you have assisting you through the home buying process as they will know the specifics of your situation best.  You will also be submitting a second deposit that will be due shortly after.  Make sure you are very clear on the terms and conditions of you agreement.
  • January 10 2010
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