When it comes to deposits to buy a new home, many things have to be considered. The only real deposit you would put down is the earnest money, which is a very important part of the buying process. In this article, we will provide you some great tips for both, making the buying process easier and more enjoyable. The most important thing is to understand that the earnest money or deposit is money you put down at the same time the initial contract is written.
This money helps show the seller that you are in fact a serious buyer. Although the amount of the earnest deposit varies, it would typically be 1% of the seller’s asking price. In other words, once you find a house you want to buy, you and your real estate agent would sit down, determine the amount of money you want to offer the buyer for the purchase of the home, and then the paperwork is drawn up. The real estate agent would take the contract along with a check from you as earnest money.
Let us say the house was on the market for $150,000. In this case, you would write a check for $1,500 as earnest money. The real estate agent would then take your contract proposal and the earnest money to the buyer’s agent, present it to see what the buyers have to say. At that point, the buyer would accept the offer, counter offer, or decline the offer. Keep in mind that while the 1% rule applies, you can and if possible, should offer more earnest money.
Once you find out what the buyer plans to do, you can then close the sale, counter offer, or move on to another house or offer the full price, respectively. The earnest money is then added in as a reduction off the purchase price. With this, you ultimately draw the contract up for $148,500 or the earnest check may be returned to you and the full price written up in the contract.
As you can see, when you get ready to buy, if you want to present your offer wisely, you need to make the buyer see that you are serious about buying the house. Sometimes, a real estate agent will suggest that you increase the earnest money, especially if the offer you are making is less than the full price. This way, the buyer has a little more upfront cash to consider, which can help seal the deal, giving you your first home, a place to call your own.