Jeffrey Harrington's Blog
Have you heard the term “earnest money” but really aren’t sure what it means? Once you have found the perfect home and are all set to make an offer, there’s one more step that you need to take. That’s to make a deposit on the home you want to buy. This is known as an “earnest money deposit.”
The Purpose Of The Deposit
The deposit shows the seller that you’re serious about buying the home. It’s a measure that allows the seller to have some faith in you as a buyer that you’re truly moving forward with your decision; you’re ready as a buyer to make the financial commitment. This deposit allows the deal to begin on a solid basis without much question.
Is The Deposit Required Legally To Buy A Home?
From a seller’s perspective, a deposit keeps a buyer from changing their mind. If there is a significant amount of money involved, the seller sees the deposit as a way to keep the buyer locked in. This makes it easier for sellers to accept an offer.
How Much Is Expected For An Earnest Money Deposit?
These deposits don’t quite have a standard amount. The general rule is that they range from 1% of the home price up to 5%. The more expensive of a home that’s being purchased, the larger the earnest money deposit should be. In some cases, the seller may even ask for a certain amount of a deposit to ensure that buyers are serious. How much money you pay at once is often negotiable. You may be able to pay part of the money at one time and the other part at a later date.
New Construction Can Require Large Deposits
New construction homes can require large earnest money deposits- up to half of the purchase price of the home. This is because the construction costs need to be paid upfront and the bank wants proof that the units being constructed with loan money are being sold to buyers who can pay for the home.
New construction homes are often customized as well. It would be detrimental to a developer to make special changes to a home only for a buyer to walk away.
Getting The Deposit Refunded
As with everything in real estate, you’ll have a contract. If you don’t follow the terms of the contract, you risk losing your earnest money deposit. Two main reasons for buyers to walk away are a flopped home inspection or financing that falls through. Read your contracts carefully. Sellers sometimes state that deposits are nonrefundable after a certain number of days.
You need to be sure that you are covered as a buyer in the purchase and sales agreement. If you back out of a home purchase without good reason like a contingency included in the agreement) you could be out of luck when it comes to getting your deposit back.
When you’re buying a home, there’s a lot to think about. Your finances probably have the biggest impact in the entire home search process. The amount of a down payment you have and the amount of loan you’re approved for help decide what you can buy.
When you hear about closing costs, what do they entail? How much will you need to cover these costs? Many people get to the closing table for their home purchase and feel unprepared. You’ll need a certain amount of cash on hand when you finally close on a home. Learn more about closing costs, so that you understand everything that you need to know about your home purchase.
Closing costs are spelled out pretty plainly in just about every kind of real estate contract. These costs are the fees associated with the title companies, attorney, banks, lenders and everyone else who is involved in the purchase of a home. The closing table is also the time when you provide your sizable down payment. The closing costs that are being referred to are considered a separate expense independent of the closing costs.
Closing Costs Vary
Closing costs can range from anywhere between 2 and 8 percent of the purchase price of the home. You can’t really “choose” what’s included in the closing, so you’ll need to have an idea of how much money you’ll need to write a check for. Lenders can give you an estimate of about how much closing costs will be.
Certain things like the realtor’s commission fees can be negotiated and can be paid for by the buyer or the seller. The good news is that you can roll your closing fees in with your mortgage in some cases. You may also be able to negotiate with your lender to pay the closing costs for you in exchange for a higher interest rate.
What’s Included In Closing Costs?
Depending upon where and what type of home you’re buying, what the closing costs actually cover varies. Here’s just some of the things that closing costs cover:
- Escrow fees
- Credit reports
- Title search
- Title exam fee
- Survey fee
- Courier fee (Most transactions are done electronically, but in some cases this may be necessary)
- Title insurance
- Owner’s title insurance
- Natural hazards disclosure
- Homeowner’s insurance (Your first year of insurance is often paid at closing)
- Buyer’s attorney fee
- Lender’s attorney fee
- Transfer taxes
- Recording fees
- Processing fees
- Underwriting fee
- Pre-paid interest
- Pest inspections
- Homeowner's association transfer fees
- Special assessments
These fees vary widely by state and the type of property that you’re purchasing. Not every fee is required, but the above is just a list of many of the possible fees that could be included in on the closing of the home you choose.
The next house that you move into is going to meet all of your family's needs. There's a large fenced back yard for your children to run and play in. Gone are the days when you worried that your kids would play too close to the street because your old home had such a small yard. Your new home even has an extra bedroom, the very space that you've always wanted to accommodate family and friends when they visit.
Moving into a house shouldn't be a nightmare
Yet, you're dreading moving. This isn't your first go round. You know how much work there is to move from one house to another. With forethought and planning, you can start to remove the dread out of the move.
How can you pull this off? Start taking these steps:
- Create a house move checklist. You could download a checklist off the Internet and revise it.
- Contact utility companies and have your utilities turned off at your current residence and turned on at your new house.
- Complete and submit a change of address form to the post office. You can complete and submit a change of address form online.
- Use sturdy plastic containers or boxes to pack your belongings in.
- Move in several short trips if you're moving across town. For example, you could pack and move enough belongings to fill two to three rooms in one day and another several rooms in another day.
- Price moving supplies and a moving truck more than a month before your move. Give yourself time to save enough money to cover the entire cost of the move.
- Return rented electronics like cable boxes to the appropriate company. Schedule to have electronic services turned on within a few hours after you move into your new house.
- Contact trustworthy relatives or friends and make arrangements to have your young children and pets watched while you move.
- Clean your new house at least one day before you move. Give yourself enough time to clean without feeling stressed or like you'll fail and not get the house cleaned before you have to vacate your current house.
- Remind yourself that you can always return to your old neighborhood and visit should you start to feel nostalgic or as if you're losing something by moving out of your current house into a new home.
Confidence plays a huge role in your next house move
Because moving to a new home brings change into your life, you may likely experience some discomfort as you pack and move to your new house. Advance planning can build your confidence. Advance planning can assure you that you have the knowledge and the skills to create a rewarding move situation.
That same level of confidence could also save you money. As you do what it takes to believe in your ability to pull off and adjust to the move, you may put your hand to more do-it-yourself work, saving yourself the expense of hiring and paying for contractors. Most of all, you could shorten the time it takes to move and get unpacked at your newer residence.