Well, that’s where an earnest deposit might be able to help. These payments are a realtor’s trick way to guarantee that someone really means business when it comes to buying a home. Some realtors require it, while some professionals believe that earnest deposits are a smart idea, but offering to pay could get you in hot water.
So what exactly are earnest deposits? We’ll talk about that and how they’ll help you lock in that house sale.
Simply, earnest deposits are kind of like a security payment. I can hear the collective groans from already. Why would I want to put a deposit down on a house I’m willing to pay for? You might be asking. Well, these good-will payments allow several things, with all parties involved benefitting in the process.
First, if you are a serious buyer, earnest deposits are a low-risk investment. It’s not technically an additional payment, but a deposit that goes directly to the cost of the house. The idea of these payments being a “deposit” are a little debatable, because if during negotiations something is wrong with the house, or in other similar circumstances, you often get most or all of the payment you put down back.
Let’s talk real estate real quick. Did you know It’s illegal for realtors to negotiate with another buyer once they’re started talking terms with you? Some buyers even take advantage of this, putting out tons of offers to shop for the best rate for their dream home, or to flip the home and make a quick profit.
Now, if we’re thinking of the housing market as a business (and it is!), consider your interest in the house kind of like a resume. You want to stand out in the best way. Earnest deposits are one of the best ways to stand out.
Earnest deposits show to a seller that you’re a serious buyer. You’re not just interested, but committed with hard-earned cash to make sure this deal goes through not just successfully and quickly.
From a buyer’s perspective these payments are just good business. In an industry where there’s low supply and high demand, you’ll attract a lot of window shoppers. With earnest deposits, you’ll weed out the wanderers hoping to stall you with bogus offers and find someone willing to move the deal forward as quickly as possible.
So how much of an earnest deposit should you offer? Your realtor will definitely know the answer to this question. After all, it’s their constant goal to sell your home. Depending on the market, 1-2% of the price of the home’s value will be the typical, safe amount to request.
If the market’s slower, obviously a lower percentage of 1% would be ideal. A good tip is if you seem to have too many offers and not enough truly interested people, a 3-4% earnest deposit will focus in those people actually interested in buying on your time frame.
Negotiate with your realtor your particular deposit price-point, and also add in a cancellation fee on the off-chance someone wants to back out. While earnest deposits are often an effective tool, you don’t want to stalled in a contract with a seller who wants to back out, especially when you want to sell your home.