In most cases for your offer we use the Residential Sales Contract, or the Special Sales Contract. On your offer we will designate how much earnest money you will be offering. Once we have an accepted contract we need to get this money to the party we designated. Typically this will be your title company. You can give this personal check to your Realtor, or mail it directly to the title company. If closing is less than 10 days from now, the check needs to be a cashier’s check directly from your bank. As you know this money will likely go either towards your down payment or closing costs. Typically the larger amount of earnest money you offer the more serious and committed the seller will consider your offer to be.
Earnest Money: Money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but applied to the purchase price if the sale is closed.
There can be a lot of angles to consider in terms of the pro’s and con’s of putting down high or low amounts of earnest money. Many times investors or non-serious buyers will put down a very small amount of earnest money, sometimes near $200.00 or $300.00, because if they end up walking away from the deal for any reason, they will only lose out on this small amount. We have also seen buyers REALLY want to show the seller that they are interested in purchasing the property and they put up a large amount of earnest money, we have seen up to $75,000.00 which was about 33% of the sales price. This definitely has a wow affect of making the sellers aware that you are serious, but unfortunately if the deal falls through, and the seller refuses to sign the mutual release form, the title company will not be able to release the money to you until the seller sells their property to someone else, or some sort of lawsuit. Eventually the buyers will get their money back, but they will likely be held up on moving on to purchasing a different property until they can receive their earnest money back from the dead deal.
Understanding the intricacies and potential problems with every aspect of the deal is something that Hermann London agents take pride in. Something as simple as line 31 of the residential sales contract can have such a large affect on the deal, and the buyers ability to find their new home. Choose your agents wisely, experience counts, and Hermann London agents have the experience and know how to protect you.