Strong financial package

[Anonymous]

Why is a big earnest money deposit important? It's not like the seller gets bonus money.

Why does a a bigger down payment percentage make an offer more competitive? Doesn't the seller get the same amount in the end?

[Anonymous]

I have this same question! Thanks!

[Anonymous]

It just shows the seller that you're serious, and that you are in good financial shape, so it is less likely that the deal would fall through at the last minute.

[cb21]

For earnest deposit, the seller will look at the size but only up to a point. On a $900k house you'll have to put at least $15k or $20k. More than that doesn't really convey any stronger message -- if the deal goes sour this deposit is at risk, but with a $50k deposit or so it's unlikely the seller will get to keep the whole amount and they know it.

Higher downpayment of course shows that you are financially stable and not someone who is stretching.

[Anonymous]

Anonymous wrote:It just shows the seller that you're serious, and that you are in good financial shape, so it is less likely that the deal would fall through at the last minute.

This is it exactly. Less worry that your financing won't work out and they'll have to start over.

[Anonymous]

cb21 wrote:For earnest deposit, the seller will look at the size but only up to a point. On a $900k house you'll have to put at least $15k or $20k. More than that doesn't really convey any stronger message -- if the deal goes sour this deposit is at risk, but with a $50k deposit or so it's unlikely the seller will get to keep the whole amount and they know it.

Higher downpayment of course shows that you are financially stable and not someone who is stretching.

Interesting - our realtor has been telling us we should try to do 10% as earnest money, which didn't sound right to me. Is there some sort of standard that people should be doing for earnest money?

[Anonymous]

Anonymous wrote:

cb21 wrote:For earnest deposit, the seller will look at the size but only up to a point. On a $900k house you'll have to put at least $15k or $20k. More than that doesn't really convey any stronger message -- if the deal goes sour this deposit is at risk, but with a $50k deposit or so it's unlikely the seller will get to keep the whole amount and they know it.

Higher downpayment of course shows that you are financially stable and not someone who is stretching.

Interesting - our realtor has been telling us we should try to do 10% as earnest money, which didn't sound right to me. Is there some sort of standard that people should be doing for earnest money?

We did 5% last year on the advice of our realtor...

[Anonymous]

What is the difference between earnest money and a down payment and under what circumstances does the seller get to keep it if the deal goes sour?

[Anonymous]

Anonymous wrote:What is the difference between earnest money and a down payment and under what circumstances does the seller get to keep it if the deal goes sour?

Sellers can keep the earnest money if buyers backout after the seller has accepted their offer. But if buyers retract offer before seller accepts than buyers get their earnest money back.

[Anonymous]

What if the deal falls through for a bad inspection or a low appraisal?

[Anonymous]

We put just over 10% earnest money in 2011 to secure a highly bid house, with the support of our realtor, who suggested 5% generally is enough. The seller told us the earnest money helped convince him to take our bid.

[Anonymous]

Anonymous wrote:

Anonymous wrote:What is the difference between earnest money and a down payment and under what circumstances does the seller get to keep it if the deal goes sour?

Sellers can keep the earnest money if buyers backout after the seller has accepted their offer. But if buyers retract offer before seller accepts than buyers get their earnest money back.

That is not correct with the standard realtor contract. It is a common misconception, bu completely wrong.

[Anonymous]

cb21 wrote:For earnest deposit, the seller will look at the size but only up to a point. On a $900k house you'll have to put at least $15k or $20k. More than that doesn't really convey any stronger message -- if the deal goes sour this deposit is at risk, but with a $50k deposit or so it's unlikely the seller will get to keep the whole amount and they know it.

Higher downpayment of course shows that you are financially stable and not someone who is stretching.

I would never accept a $15k deposit on a $900k house.

[Anonymous]

Anonymous wrote:

cb21 wrote:For earnest deposit, the seller will look at the size but only up to a point. On a $900k house you'll have to put at least $15k or $20k. More than that doesn't really convey any stronger message -- if the deal goes sour this deposit is at risk, but with a $50k deposit or so it's unlikely the seller will get to keep the whole amount and they know it.

Higher downpayment of course shows that you are financially stable and not someone who is stretching.

I would never accept a $15k deposit on a $900k house.

Can I ask why not?

On a side note - do all these people putting $50-100K in earnest money just keep this money in their checking accounts while looking? We have the money, but do not have it ready and waiting to write a check on when we have to make an offer 24 hours after seeing a house in this market. What do other people do?

[Anonymous]

On a side note - do all these people putting $50-100K in earnest money just keep this money in their checking accounts while looking?

We did - some in checking and most in savings.