Buying A Home
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You guys were right...but now I really need advice fast..so nervous
So you guys were absolutely right they wanted me to bring the checkbook for the earnest/good faith payment.
I asked them how much that was (was I supposed to ask or say what I'm giving?) and they said 10K! I though that was really high! Its almost half of what our dp is going to be. Am I wrong?
I am supposed to go sign the contract tonight and my stomach is in knots at all the things that can go wrong. If financing falls through or they decide to go with another buyer..do we get our money back??
I'm sorry for all the questions but I am nervous as hell right now.
The price for the house is 380K if that helps determine anything
Re: You guys were right...but now I really need advice fast..so nervous
Our earnest deposit was $10K, but our house was $600K+. It does sound a little high for your price range, but it signals a strong offer as well.
As pp said, there are contingencies built into every contract that allow for the return of earnest money. your realtor will walk through all this with you.
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Is this for a new build? We had to put $1000 to just save the lot we wanted and then when we signed the contract we had to put 5% down. However, I have heard others say that they were required to do less.
ETA: We were very certain about our financing when we did this. If you're not, I would not be able to put that much down. If this is for a previously owned house, I would definitely not put that much down.
My stomach turned at the thought of a 10k deposit. That seems crazy to me unless its a new construction. I have heard of deposits that high in order for the builder to break ground.
So a remodeler wants that much earnest money? Tell him to get bent. Out of his damn mind.
It sounds like he might have cash flow problems and wants to make money if this deal falls through. His problem, not yours.
Also, since you aren't working with an agent, are you SURE this broker has your best interests at heart? Could the broker and the remodeler be in cahoots together? If you go thru with this, make sure the contract has a financing contingency and that you do NOT have to go thru the broker - the broker could be "unable" to get you funding and then he and the remodeler split the $10k.
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Thinking of doing cosmetic updates to a dated home? These were our costs.
Our REA told us to bring $10k and our house was less than yours. That being said, I will NEVER do that again.
If you do have no other option, make sure your contract is ironclad and that you are able to walk, without losing your earnest money, for not being able to obtain financing within a certain interest rate, bad inspections, not reaching appraisal amount, etc.
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Did your agent (or the sellers' agent) add that to your offer/binder? Because WE specified what we'd put down for GF. We put $42k/10% but only because there were other offers coming in and we wanted our's to be the strongest. I'd review the offer/binder if I were you.
ETA: Just saw that you didn't have an agent. I'd still double check anything you HAVE signed to this point to see where this $10k is documented.
"If you go thru with this, make sure the contract has a financing contingency and that you do NOT have to go thru the broker"-
That is awesome advice, I will make sure I do that.
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That is a pretty high amount for a regular sale. Since you said it's not new construction, that circumstance is ruled out. Are there multiple offers? Is this a short sale? Basically, is the earnest money deposit being used to make your offer more attractive because of a special circumstance? If not, I'd be balking at that amount.
And as PP's suggested, I'd be very leery of this mortgage broker's role. Something seems off about the whole thing.
On a $450K house our buyer put down $15,000 - our REA asked him to up it in his offer because the more the buyer puts down the less likely they are to just walk away. You might walk away from $1000 but you'll want $15,000 back.
It sat in trust with his lawyer and transferred to us the day of closing with the rest of the money. He might have put more down but that would be between him and his bank.
We also put down high deposits to start building.
That said, IF something had happened and he was walking away, even if he was exercising a contingency (like financing), we would have to sign agreeing to the return of his deposit. If we refused he could take us to court but his money would remain in the trust until it was resolved. I had it happen to friends. They did get their sizable deposit back, they knew they would because they were within the contract, but the seller decided to be a jerk and refused to sign off so they had to win in court. It took them 2 years.
So be very sure about who is holding your money and that your lawyer has reviewed your contract and given you the go ahead. If they're trying to pressure you then I wouldn't give them anything.
This + $10k requested for a deposit + no realtor protecting you...
I could be wrong but my scam alarm is blaring in my head right now.
Tread very carefully. Don't sign anything or turn over a deposit check until you have a real estate attorney review everything.
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Whew thanks so much you guys, I will try to answer the question I saw in order. The house is in Long Island in NY so it is a pretty HCOL area but not as crazy as Manhattan.
The lawyer, I picked out myself so hopefully I won't regret that.
The check was to be made out to the law firm of the seller to be held in an escrow account.
I am absolutely taking you guys advice concerning the contract. When I go tonight I will make it known that I am not comfortable with paying that high of an earnest amount. I am also making up a list of questions based on alot of the things mentioned here and if I dont have an ironclad contract that I am comfortable with. I will just have to find another house, and possibly a new broker.
We had a $10K earnest payment on our condo. The building was gutted and the entire interior was redone. We would have gotten the deposit back if we couldn't secure financing, didn't like the condo rules, inspection issues or if the seller backed out. But we were placing an offer on a "white box" so before they finished it with our selections (flooring, cabinets, counters, fixtures, etc.), they wanted to know we were serious. The only money we would have lost would be any upgrades that had to be prepaid.
It was actually kind of nice because a 30% down payment was required so that was a nice chunk already accounted for when we closed.
On a 424k purchase we put down 6k, and the seller's realtor said that she normally requests 5% down for escrow which would have been about 21k, but with a 30 day closing she didn't bother.
Also, your lawyer should be putting every contingency possible in your contract, ask them to make sure you can get out and get all of your money back under almost any circumstance. Realtors are not the people to ask about contracts or deposits or escrow money, your lawyer is.
I'm on LI too. My best friend and I both bought houses in the last year, and my father is in real estate law. I wouldn't worry about the earnest money so long as a neutral 3rd party is holding it (not the sellers) and so long as you have clauses in your contract that will allow you to get the money back (inspections, failure to agree to terms post inspection, etc.). We were able to negotiate 5% in earnest $$ but my friends have all put 10% - for one of them, it meant over $60k! But unlike the rest of the country, 10% seems to be pretty standard for LI.
RIP Dr. Irving Fishman - 10/1/19-7/25/10 - thank you for holding on for me.
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We did $2k on a new build and only did the $2k because we were asking the builder to include a list of extras in the purchase price. Purchase price of the home is $155k.
IL's did a $1k on a new build in the $600k range. There is no reason to put now that much for earnest money IMO.
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I am also on Long Island and put down $10k made out to my attorney's office on a $530k house which is less than most other people I have spoken to. Even though your house a bit less expensive, I think that it is a standard amount for where we live. Since you are legally required to have a real estate attorney when buying a house in NY they typically hold the earnest money.
Agreed, the house we are considering has a 20K earnest money requirement--one of the lowest I've seen for a house in our price range.
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