How To Keep Your Deposit Safe

There is no doubt that buying a home in the current market offers many incredible deals. However real estate transactions can fall apart for many reasons, some of which are completely out of your control so it is critical that you make sure that any deposit you make is safe just in case you need it to find another property.

While a larger deposit may make your purchase offer more attractive you should try to minimize your risks as much as possible. Different areas of the country and different types of properties present different customs regarding deposits. 1% of the purchase price is normally acceptable though given the current buyers market many sellers will accept as little as $500 in earnest money deposit. Remember that a seller can always make a counter offer of a higher deposit and you can use this as a bargaining chip to get other concessions you desire.

Should the seller be unwilling to bend on the amount of the deposit you can suggest breaking it into two pieces and make a second deposit within a couple of weeks. This will give you additional time to make sure that your financing is in place and have inspections completed so that you can move forward with confidence.

As important as how much deposit you make is where your deposit is held. You should never hand over any money directly to a seller prior to a closing under any circumstances. Many real estate brokerages have their own escrow accounts which are carefully handled. However you will be safest to place all deposits with an attorney or title company of your own choosing and who either represents you or acts as an unbiased third party.

You can also protect your deposit by ensuring that your contract includes several contingencies that give you the right to withdraw from the contract and have your deposit returned. This includes financing and appraisal contingencies so that if the property is valued at less than the agreed upon purchase price or you are unable to get approved for a mortgage loan you will not lose your deposit. While the majority of properties are sold ‘as-is’ today you can still include a clause that will allow you to withdraw or renegotiate the contract if repairs as assessed by a home inspector exceed a certain dollar amount or percentage of the purchase price.