For those who may be looking to buy a home for the first time, you may have heard “deposit” and “earnest money” talked about in relation to putting an offer on a home. Here are a few commonly asked questions about deposits to help start you out on the buying process!
What’s a deposit?
A deposit is sometimes also referred to as “earnest money.” This money is meant to show home sellers that you are serious about buying a home. It also is put towards your downpayment and any closing costs.
How much is a deposit?
This will vary depending on your location, the state of the real estate market, and what your seller may be asking for. But often, a deposit is 1-2% of the price of the home. So, for a home that is $200,000, this could range anywhere from $1,000 to $2,000.
When is a deposit due?
You will need to submit your deposit with the offer on the home. This shows the seller that your offer is serious.
What happens if a deposit is late?
If the deposit is late, you risk being in breach of contract. Your deposit should typically be received within 5-7 days of contract acceptance.
Is your deposit insured?
The terms of your purchase agreement will determine under what conditions you may get a refund if the deal does not go through.
Can I refuse to provide a deposit?
If it is part of your agreement to not provide a deposit, then you can refuse. However, if a deposit is part of what the sellers are looking for and requiring, then it is probably a waste of time to make an offer and then refuse to submit a deposit.
What happens to my deposit if I don’t get financing?
Whether or not you get your deposit back will be determined by deadlines in your purchase contract. In most cases, you will get your deposit back because of a financing contingency in the contract. This ensures you are protected if you cannot obtain financing.
What happens to my deposit if I don’t waive the home inspection clause?
If a problem is found during a home inspection, you do not have to follow through and buy the home. You can get your deposit back.
If I’m a seller, what happens to the deposit if your buyer doesn’t close on the transaction?
If a buyer gets cold feet and abandons the deal, the seller gets to keep the deposit in most cases.
Want more tips on the buying process?
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