#1 –What is earnest money? Why are there different amounts for different homes? What does an agent say to a seller about your offer?
Keep in mind that, as a Buyer, an escrow deposit can clearly show a Seller how serious or committed you are in buying their home. If you want the Seller to know that you really love their home and want to buy it, your escrow deposit is one thing that can let them know. If you’re buying a $400,000 home and your Real Estate contract reveals a deposit of $1000, does this really show the Seller how serious you are about purchasing their home? That’s less than 1%, which screams; not too serious, not too committed. A bit of seriousness begins at a minimum of 1% and as you go up from there, lets the Seller know of your intentions. Depending upon the type of financing you’re utilizing, your loan type can set forth the amount of your deposit. There are a number of different options that will show the Seller of your good intentions. These options can be discussed with your trusted Realtor. Just remember, that if you try to skimp on your deposit, there could be another Buyer that comes by offering a more attractive deposit, which the Seller may read as a more interested Buyer. It’s a good time to put your money where your mouth is, so to speak. You don’t want your offer to appear as being nonchalant. Now is not the time to show you don’t care.
Before looking at homes your trusted REALTOR® will explain your price range and what amount of earnest money is typically expected in that price range when making an offer. Prepare yourself, don't be shocked when you find your perfect home and you are writing the offer and your agent asks for a earnest check. BE PREPARED! You should not be looking at homes if you haven't saved for earnest money. Let me explain... If you find your perfect home and 3 other buys think it's their perfect home, all 4 will write an offer. If you have a solid contract it will include earnest money. If your offer was up against the 3 other offers and they all had earnest money and your offer didn't , guess who's contract won't be chosen by the seller to buy that perfect home!
Sellers depend on their agent to explain to them when a contract comes in on their home if it is a good buyer. How I check for a good buyer contract is by first looking at the FINANCING, will this be a more strict inspection for a specific kind of loan like FHA, next is EARNEST money, are they serious about this home, did they show they were serious with the appropriate amount of earnest money. The next thing I go over with my seller is the buyers request for INSPECTIONS. (Writing a good offer doesn't mean don't write in inspections.) A good offer has a typical inspection time frame allowed. This means they have so many days to have inspections done. It is important that this time frame isn't left open to long. The typical amount of days allowed is 15-20 in our local market. If you have a large amount of days for inspections you are not allowing time for repairs and this can push back a closing date. I don't know about you but when I am a seller and moving, that closing date is pretty important to me! FYI- If you have a long inspection time that runs into another month as a seller you have to pay another mortgage payment! Yuck!
Make sure that you really want to purchase the home and then show that you agree to do what you have put in the contract.
If you’re not serious, don’t present an offer.
*Your lender will explain to you how earnest money will A)Be applied to your loan or B) Given back to you at closing.
#2 – Be prepared with your Financing commitment due date
I’m sure it was recommended to you that you get Pre Approved from your Mortgage Lender regarding your financial ability to make a Real Estate purchase. Your Lender should then be able to provide you with a date in which they can provide you with a financing commitment. This should be a written commitment that indicates you have received a go ahead from your Lender for them to provide you with the financing needed to purchase your home. This will typically come with a few conditions that must be met with the formality of gathering certain documentation. On our standard Illinois Real Estate contract, the average commitment date is 30-45 days. Of course, check with your Lender to confirm their capability to meet such a date. Remember, that any date that you put forth in the Real Estate purchase contract, will need to be met, so as not to be in default. If you state on the contract that you will provide commitment within 15 days and you provide a written commitment on the 18th day, you are now in default of the contract and any attempt by you, as a Buyer, to cancel the contract can result in you forfeiting your escrow deposit.
Pre-approval, Pre-approval, Pre-approval! I will not show a home to a buyer who is not pre-approved. Why would I mislead you to look at homes that may be way under your allowed budget or way over your allowed budget? Why would I show you a station wagon when you could own a Corvette? That's what pre approval is for. It let's you and your REALTOR® know what homes you qualify for and it let's a seller know when you are ready to write an offer that you are so serious, you have your financing in order and you can afford their home!
Call me and I will give you lenders names who can typically pre-approve you the same day if you qualify!
I’ve listed a few of the important terms to speak about when presenting your offer to buy a home, so the Seller can see your a serious buyer! Perhaps you have other questions about buying a home – call me now!
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This BLOG is not intended to provide legal advice, as you should hire a Real Estate Attorney to provide legal advice.
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