Purchasing a home–whether you’re a first-time home buyer or a seasoned veteran–can be complicated. The home buying process has many steps that can be confusing, starting with the buyer’s deposit. Also called “earnest money,” the deposit is a crucial component of the residential real estate process; failure to carry out this step properly can result in a broken purchase agreement or even legal action.
With that in mind, here’s what you should know about purchase deposits when buying Grey County real estate.
What is a Deposit?
Put simply, the deposit when buying a home is an amount of money intended to show that the buyer is acting in good faith. Putting down a deposit demonstrates to the seller both that the buyer truly does have the necessary cash to complete the purchase and that they are genuinely interested in closing the sale.
Keep in mind that the seller does not receive the deposit directly. The real estate brokerage company holds the deposit in trust, applying the amount to the sale only upon closing.
How Much Should the Deposit Be?
There’s no set amount that a deposit for Grey Country real estate needs to be, and the amount offered is ultimately up to the buyer. The deposit can even be the entire down payment amount.
Generally, many sellers consider the deposit amount offered by the buyer as a good indication of the seriousness of the buyer as well as their purchasing power. That means that a larger deposit can give a buyer an edge in a situation where a seller is fielding multiple offers.
Is a Deposit Necessary in a Home Sale?
Technically, no. The purchase agreement can be drafted to exclude any mention of a deposit, and the seller can choose to accept this deposit-less agreement. However, it’s important to note that accepting a purchase agreement that omits a deposit is not usually in the seller’s best interest–particularly if the seller has multiple offers to consider.
In other words, while a deposit is not a legally necessary part of a home sale, it may be practically required in order to get a seller to accept your proposal over that of a buyer who is offering a deposit.
How Does Failing to Pay the Deposit Affect the Purchase Agreement?
As mentioned above, the purchase agreement does not have to include a deposit. However, if it does, signing the purchase agreement does oblige a buyer to submit the full amount of the deposit in the outlined time frame.
All too often, buyers with cold feet think that they can easily get out of a signed purchase agreement by simply failing to pay the deposit. Unfortunately, this is almost never the case. Failing to pay the deposit is usually viewed as a breach of the purchase agreement and can open a buyer up to expensive legal action.