Buyer FAQs: Part Two, Money Matters

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When buyers find the right home for their lifestyle, not only does the offer need to be put together to present to the sellers, there are money matters to attend to. For starters, the buyers will benefit greatly by being pre-qualified and pre-approved for a loan amount that meets the purchase price offered to the sellers. Having a pre-approval letter included with the other paper work strengthens the offer. In addition, there is the matter of earnest money. Below are four frequently asked questions, and corresponding answers, regarding money matters in the buying process.

Does it cost me money to make an offer?
When you write the offer on the home you’ve chosen, you will be expected to include an earnest money deposit. The deposit is a sign of your good faith, that you are seriously interested in buying the home.

Where does my earnest money go?
Once the buyers and sellers have a mutually accepted offer, the earnest money is deposited into a trust account. That deposit becomes a credit to the buyers toward the purchase expenses.

Can I lose my earnest money?
Real estate contracts are complicated legal transactions. This is another area where having a knowledgeable and professional agent is a neccessity. Rarely do the buyers lose the earnest money. Most often, if the transaction falls apart, there are circumstances beyond the buyers’ control that cause it to happen. However, if the buyers willfully decided that they no longer want to buy the home and have no legal reason for rescinding their offer, then the sellers have the right to retain the earnest money.

Is that all the money that’s involved in the offer?
Some lenders require the cost of the appraisal and credit report at the time of the loan application.

1 Comment

  1. Earnest money is one of the pieces of the real estate contract most often misunderstood. This Blog did a great job of answering the most commonly asked questions regarding earnest money.

    Additionally my clients most often ask me ‘How much earnest money is customary?’. I have written contracts with as little as 0.5% and as much as 5%. I often advise around 3%. It should appear to the seller like the buyer is significantly invested in a positive outcome.

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