Earnest money deposit?

brianabrad · April 2012

How much of an earnest money deposit did you make?

We are planning to make an offer on a new construction home tonight and our realtor has suggested that since we are asking for a large amount of extras to be included in the purchase price that we should make a $3000 earnest deposit. The full list price of the home is $155,000 and we are putting 20% down. Making the $3000 earnest deposit is not a problem but we are concerned about having this money tied up, if something was to go wrong.

Should we be concerned about this? How much of a deposit did you make?

kimberlygo · April 2012

Ours was $2500

Juris11 · April 2012

The standard here is $500, which is what we put down as earnest money. (on a $250K house, fyi) $3,000 seems pretty crazy to me, but maybe it has to do with new construction? From what I understand, the earnest money goes towards your down payment and if refundable if you break the contract legally. So like if you have an inspection contigency and some big issue is revealed and you want to back out, you would get that back.

I get your unease though-that seems like a lot of money to have tied up, but I guess that is the point. To make you think twice about walking away for no good reason.

pombride · April 2012

We are building and our deposit was $2000. We went over our allowable upgrades so we had to add another $4000 when we selected our options.

atlcatlover · April 2012

Ours was $10K on a $600K house.

LoveKiss · April 2012

According to our realtor, earnest money is a good way to convey to the seller that you are serious about your offer and are willing to "put your money where your mouth is". It's also a way to demonstrate your cash availability, which means that you may be in a better position to close on time. Since you are asking for quite a few concessions/upgrades/etc., it may make sense to make your offer as strong as possible.

We areunder contract on a short sale, and felt that it was essential to bring a very strong offer to the table in hopes of having the seller's bank approve the deal in a timely fashion. Basically, we want to tempt them with cold, hard cash. We put down $10k in earnest money, which is 2.3% of the purchase price. Whether this is a successful strategy or not remains to be seen. LOL

JoeLies · April 2012

Our agent recommended a check for 1% of offering price with our written up offer, with the promise of an additional 9% upon signing contracts. Basically to show we're serious about the home and to signal to the sellers that we're financially secure enough that obtaining the mortgage should be a smooth process.

Quiksilver620 · April 2012

$2,000 total. we wrote a check for $500 with our offer, then another $1500 with the p&s

brianabrad · April 2012

LoveKiss:
According to our realtor, earnest money is a good way to convey to the seller that you are serious about your offer and are willing to "put your money where your mouth is". It's also a way to demonstrate your cash availability, which means that you may be in a better position to close on time. Since you are asking for quite a few concessions/upgrades/etc., it may make sense to make your offer as strong as possible.

We areunder contract on a short sale, and felt that it was essential to bring a very strong offer to the table in hopes of having the seller's bank approve the deal in a timely fashion. Basically, we want to tempt them with cold, hard cash. We put down $10k in earnest money, which is 2.3% of the purchase price. Whether this is a successful strategy or not remains to be seen. LOL

This is exactly what our agent said. She said due to the amount of upgrades we are asking to have included we need to have a strong earnest money account. I can understand how putting money down could make the builder a little more excited to deal with us.

TarHeels&Rebels · April 2012

This is local market dependent. Here, it's $500-$1000. The rationale stated above is true no matter what, but whether the local market puts much stock in it is the question. There's no need to put down more than is customary in your market on a regular, run-of-the-mill sale.

Nechie122 · April 2012

Our realtor told us that $2500 or so is standard in our area. We first offered $3000 and asked for a 60-day closing. They countered asking for a 45-day closing (among other things). We countered back and sweetened the deal by offering $5000 in earnest money because we literally could not close any earlier. They (finally) accepted.

deanbean · April 2012

For every offer we have made we have written a check for 3-5% of the bid, ie tens of thousands of dollars. Its not "tied up" unless your offer is accepted, in which case your entire down payment will be needed soon anyway.

kaylie622 · April 2012

This varies by region. It's new construction and I'm guessing there are several lots available. I would offer what you're comfortable with and see what they say. If they turn down some of your extras you can always up the earnest money then.

On a $412K house our earnest money could have been $500, but we did $1,000. Our second deposit (10 days later after inspection) could have been as little as $2,000, but we did $10,000.

cg-pm52111 · April 2012

We put an offer on a short sale any they required 3%, which was more than we were planning, but not a huge deal. For a typical offer (because this is the 4th place we've put an offer in) we put $1000 to start and another $1000 after the inspection. For this house, we did $1500 to start and ended up having to do aprox. $2500 after inspection to meet the bank's 3% requirement.

lmdbww · April 2012

I was told here, usually it is $1000 with the offer, and possibly another $1-2k more if the seller requests more.

deanbean · April 2012

I'm really surprised at the low earnest money amounts. If I was the seller I wouldn't feel like the buyer had any skin in the game. You could break the contract and only be out $1000?

MNVegas · April 2012

We put $5,000 earnest money on our new construction home.

dapotato · April 2012

deanbean:
I'm really surprised at the low earnest money amounts. If I was the seller I wouldn't feel like the buyer had any skin in the game. You could break the contract and only be out $1000?

remember not all markets are as crazy as ours, and the amounts/percentages do seem to vary a lot by region. $1k means a lot more when you can get a house in the 100k range.

like you, our deposits were in the five figures for all the offers we put in.

Juris11 · April 2012

dapotato:

deanbean:
I'm really surprised at the low earnest money amounts. If I was the seller I wouldn't feel like the buyer had any skin in the game. You could break the contract and only be out $1000?

remember not all markets are as crazy as ours, and the amounts/percentages do seem to vary a lot by region. $1k means a lot more when you can get a house in the 100k range.

like you, our deposits were in the five figures for all the offers we put in.

This is true for us. We are in a pretty LCOL area-I watch House Hunters in California and places like that and think it is crazy how this tiny, nonupdated house goes for waaaay more money than our nice, large, update home.

Plus, the market is never fast moving, so it isn't as likely you are competing with other buyers. Here it is more of a show of good faith than a measure of damages for breaking the contract.

aokon · April 2012

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Earnest money deposit?

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