As soon as an offer is made on a property, the counteroffer process can go really quickly. Before you start whipping numbers to and fro, the issue of earnest money deposits has to be addressed.

House Sellers, Property Buyers and Serious Money Deposits

If you are selling a home, nothing sets your adrenaline up like receiving an offer from a likely purchaser. All the hard tasks and inconvenience has paid off. All you need to do is come through the offer and counteroffer procedure. Of course, you are not going to accept the first offer you get. Rather, you put on your thinking hat and start strategizing on a good counteroffer. As you are contemplating, it’s crucial to bear in mind what’s called earnest money deposit.

An earnest money deposit separates the men from the boys when it comes to assessing likely purchasers. In essence, this is where you are able to see both how believable and serious the likely buyer is regarding your house. It is both a statement of their liquidity and their cognition of the procedure.

An earnest money deposit is also known as a good faith deposit. The sum of the deposit is completely negotiable, but ordinarily is an amount of 10 percent or less of the sales price of the home. The custom and practice in your region involving the percent is the key. It is going to differ from neighborhood to neighborhood in the United States, so ensure you receive a bid on what is expected. If the regular down payment sum is 5% and you require ten percent, it could be a deal killer from the get-go and the purchaser might move on to a different house.

Once you have agreed on a percentage, the buyer should deposit the earnest money deposit with a third party. The party might be the escrow broker, a lawyer or even a banking company in certain states. If the deal runs smoothly, the deposited amount is considered as a portion of the down payment on the house when the transaction closes. Ah, but what happens if it does not go smoothly?

The earnest money deposit could be forfeited to the home seller in certain cases. On the face of it, the certain situations are governed by what the parties agree to in writing and state regulations. Generally, the buyer is going to receive her money back if the transaction does not fall through due to a seller issue like extensive termite troubles that were not made known by the home seller before the offer was made. In turn, the buyer may lose the down payment amount if she simply doesn’t want to go ahead with the deal. In several realty contracts, this process is regarded as liquidated damages automatically granted to the seller given the fact that you wasted time with the property buyer and had your house off the market.

All and all, earnest money deposits must be considered as back up protection, not a potential profit center. If a home buyer is unwilling to place a deposit, reject the offer and move on.