What is Earnest Money and How Much Do I Need?

July 3, 2020 by Karen Baker 1 Comment

So, what is earnest money?

Earnest money is a good faith estimate that buyers put down when they make an offer seating they are serious about buying the property and they’re willing to put money down on it. It’s basically a deposit so that the seller cannot accept any other offers from other potential buyers. You’ve put money on the deal, you are serious about buying, and the seller needs to honor the offer until or if something else happens to change the offer or the transaction.

How much should we put down?

This really varies because it depends on your current situation, the price of the home, and the negotiated offer. In the past, buyers can legally put down anything they want, including less than $500, and IOU, or even personal property. While this is not done any longer, it still could be legal but, other buyers may put down higher downpayments, which look more attractive to a seller. If the seller is reviewing multiple offers, they’re more likely to choose an offer that has a higher down payment or earnest money deposit. A good rule of thumb is anywhere from 1% to 3% of the asking price of the home. This could mean as little as $1000 or as high as $10,000, or even more.

When does it get deposited?

In our NW Indiana real estate market, we have a couple of different ways it can be deposited. The earnest money check, cashiers check, or money order needs to be presented with the offer or at least a copy of the check. This shows that the buyer is serious about the purchase and is willing to put down money. However, that does not get cashed or deposited until either three days after mutual acceptance or three days after approval on the home inspection. The money is typically held by either title, escrow, or the real estate brokerage of the buyer’s agent. It gets deposited into an escrow account or mutual fund account and is credited toward the purchase of the home on closing. Both are negotiable.

Can you get your earnest money back?

There are a couple of reasons you would want to get your earnest money back. If, after the inspection, the report is not up to your standards and you choose to terminate the transaction based on the inspection, you can get your earnest money back. The expected price range, the buyer can get the earnest money back. If they simply pull out of the deal without a reason or without negotiating with the seller, the earnest money could be lost, but a great buyers agent will typically find a way to get the earnest money back should the buyer change their mind.

The earnest money is really a security deposit for the seller. Should the buyer back out for lamer reasons, the seller now has to read list of the property, put it back on the market, advertise it again, and go through the entire process. If the reason for backing out of the transaction is not a legitimate one, the seller is legally entitled to that earnest money for their lost time and emotional stress.

Earnest money is really a major part of the real estate transaction. Even if you’re going for a zero down or low down payment home loan, this money will be out-of-pocket as will your home inspection. It’s important to have a little bit of money set aside for these funds when buying a home.

Get Started on Buying a Home Today

More Information for Buyers:

What Comes with the House?

How to Be Your Mortgage Lender’s Best Client

What is the Seller’s Disclosure Form?

5 Hidden Costs to Buying a Home

How to Make the Most of Your Open House Visit

September 24, 2018 by admin Leave a Comment

How to Make the Most of Your Open House Visit

Visiting an Open House? Here’s How to Make the Most of that Visit

Open houses to the runaround as being not that beneficial when it comes to selling the home but if you are a buyer that loves touring open houses here are some ways to make the most of your open house.

It’s a great way to learn about the market.

If you’re just exploring the neighborhood or looking for a home in a new town, browsing open houses is a great way to get to know the market, the general home price and the style of the homes in a particular neighborhood.

Read More: The VERY Best Advice for Home Buyers

You don’t have to give anyone your information.

A lot of listing agents or the buyer’s agent sitting the open house will want every person that enters the home to sign in. While it’s not required, you don’t need to be rude about it. It’s common courtesy to recognize and say hello to the agent and for their safety as well, introduce yourself. Remember, they don’t know you just as much as you don’t know them. They’re protecting the home and their cellar so signing in with a simple name is a good way to keep track of who actually came through the house. If you’re an active buyer and you already have a buyers agent, make sure the agent sitting the open house understands that so they won’t bother you.

Watch out for other buyers.

You can tell a lot about the activity of a particular area or neighborhood by watching other buyers. If there’s a lot of people walking in and out quickly the home probably have some issues that you want to address. If potential buyers are taking their time, communicating with each other or asking about the price, you can probably assume that the home is situated in a hot market. This could help you learn a lot about your potential competition.

Real Questions to Answer When Choosing the Right Home

Ask questions.

Most of the time the seller will not be present during an open house but the listing agent might be. Ask as many questions about the property as you would need to know. This is their job and they are a direct connection to the seller. If there’s anything they don’t know, they should be able to find out with a quick phone call directly to the seller while you’re browsing the home. You’ll also want to ask why the seller is selling.

Relocation to Sunset Beach – What you should know

You could meet your future real estate agent.

If you’re not currently working with the buyer’s agent, an open house is a great place to find and interview your potential buyer’s agent for the future. After him questions about their business and see if you feel comfortable speaking with them about home buying. You never know where you might find your next buyers agent.

Open houses are probably not going to go away anytime soon. They’re a great way to expose the home to potential homebuyers, have people find out about the neighborhood and speak with the agent about why the seller is selling. They probably will never go away so if you’re interested in looking at open houses in Sunset Beach NC or surrounding communities on the Intracoastal Waterway please contact our team at any time. We would be happy to send you a list of open houses for a particular area.

Should I Close Before the End of the Year?

December 19, 2017 by admin Leave a Comment

The end of the year is just a couple of weeks away and you might be wondering if you should closure loan before the of the year late? Are there any benefits to closing before December 31? If you’re escrow or title company has given you the option of closing before the end of the year there may be reasons for it. Here are some benefits to closing before the end of the year.

Tax benefits.

This is probably the biggest one in the reason most will advise you to close quickly. If you’re buying a new home this will entitle you to tax deductions on your 2017 taxes. You could claim points or origination fees on closing cost deductions on a new loan. This only applies for the year you close the loan. If you wait until next year before closing, you will have to wait an entire year before you can deduct those fees. Mortgage deductions can also allow you to deduct any mortgage interest, which works well for new homeowners since early mortgage payments tend to be mostly interest anyway. Property taxes can also be deductible too.

Interest rates. Closing escrow on a new home purchase before the end of the year is a great way to lock in low rates for the life of your home loan.

Nonfinancial benefits.

If you close before the end of the year you may be able to get into your new home before the holidays really hit. Even though we are very close to Christmas, and you may not be completely unpacked, you won’t have to worry about that after Christmas. Everything will be done and you will be in your new home.

Winter is still coming. It’s only going to get colder here in North Carolina so getting into your homes soon means that you’ll avoid moving in the dead of winter.

Increased motivation. Everybody wants to get things done and tied up before the end of the year so this is good motivation for everyone else to be on their game and get things done.

Of course, we don’t want to add any more stress to the already stressful holiday season but, if you can close by the end of the year it might be a great benefit not only financially but emotionally.

Browse our website for more tips and tricks to buying and remember to call us for all Sunset Beach homes for sale.

Read More: Buying advice from real people

How to schedule the closing in your favor

How to know you’re getting a good deal

How Do I Know I’m Getting a Good Deal?

April 5, 2017 by admin Leave a Comment

How do I know I’m getting a good real estate deal?

When buying a home, the perfect home may be a dream, but there are some things to look for to know whether or not you’ve made or are going to make a good purchase. Check out these 4 things when looking for a house to know you’ve got a great deal.

How Do I Know I'm Getting a Good Deal?

#1. Price.

Price is the number one factor when determining a deal. Regardless of what the home looks like, if it is priced correctly for its condition, location and size, you know whether or not is overpriced or underpriced or at market value. If you are unsure, your real estate agent should be able to tell you whether or not it is priced correctly. An amateur real estate agent, one that does it part-time, or a brand-new agent, may not know whether or not a home is priced correctly. Agents that are very familiar with local communities, neighborhoods, and subdivisions will be able to tell you if the home is priced correctly, overpriced or under market value. Once you know your price range in which to search, your real estate agent should be able to present you with homes within that price range and pick out those that are a good deal.

#2. Features.

A good deal has to have the features that you are looking for in a home. It might be priced correctly but if the home does not offer the features you are looking for, it’s not a good deal to you. Coupling the price with the features that you want naturally are the components that make up a good deal. If the home has the right number of bedrooms and bathrooms that you are looking for, features such as an open design, backyard, or the letters that you want and it’s priced correctly, you’re probably getting a good deal for you.

#3. Condition.

There were two similar homes within the same neighborhood priced $40,000 different from each other. The higher-priced house had a few extra landscaping features but the size, condition, and location were all fairly the same. The home priced $40,000 less sold within a week. If the same buyer were looking at homes, naturally the lower priced home would’ve been the better deal.

Condition means the state of repairs that the home needs. There’s usually fixer-upper, fair, average, good, and excellent conditions. Excellent conditions would be primarily for new construction homes or brand-new remodels. Many homes are in good condition so other factors would need to play a role as to whether or not it’s a good deal. If the home is fair or is in a fixer situation, the home would need to be priced adequately for it to be a good deal and then again, the buyer would need to want this type of home as well.

#4. Location.

We’ve always heard the phrase location, location, location. But this really is true when looking for a good deal. Are you looking for a home in the neighborhood with a community, gated subdivision, a view, waterfront or oceanfront, close proximity to work or schools? All of these location factors will play a role in conjunction with condition, price and features. If the location works with the price and it’s in the condition you want with the features you need, you obviously are getting a good deal.

For more details on getting a good deal in Sunset Beach and surrounding communities and oceanfront towns in North Carolina give us a call today.

Getting Ready to Buy? Do This First

January 11, 2017 by admin Leave a Comment

If 2017 is going to be your year to buy a house, whether it’s your first home or you are a repeat buyer, you can start to get your finances in order now so that when it does come time to buy you ready to go. Getting Ready to Buy? Do This First

We want all of our buyers to be comfortable when they purchase their home. Being stressed, over budget, and nervous about finances is not a good way to enter homeownership. There are three main things that potential homebuyers need to concern themselves with if they’re planning on buying this year.

#1. Understanding and getting a good grasp on their credit history and report.

Order a copy of your credit history and report from one of the three major credit reporting agencies, Experian, Trans Union, or Equifax. You can also get a copy through your local bank. Any of these reports will be very similar so you want to look for errors, mistakes, outstanding balances, collection notices, or anything that looks out of the ordinary. Clean up your credit history and report the best you can, which could take a month or two depending on the errors or issues therein. Try to increase your credit score to at least 680 by paying your bills on time, paying off debt but leaving available credit on credit card so that it shows you have additional credit available, and paying down as much debt as possible.

#2. Save a little bit of money.

You will need an earnest money deposit and a down payment as well as inspection costs when purchasing a house. If you are a repeat buyer you might be able to use the equity when you sell your existing home and turn around and put it as the down payment to your new house but if this is your first time buying you’ll need a substantial down payment. FHA loans require 3.5% down and conventional loans need at least 10%. Talk to your lender about the different options when it comes to loans. An earnest money deposit is typically 1% to 3% of the purchase price of the house so you want this in liquid cash in order to hold the offer on the house. You also need money for the home inspection, which can range anywhere from $300-$800 depending on the type of inspection and the inspection agency.

#3. Try to stay calm and patient.

Finding the best house for your needs and your budget may have been in a day or it might happen over the next six months. By preparing now you’ll be ready to jump on the right house when it hits the market. Make sure you know what you want in a house, have your debt to income ratio below 43% and try to stay unemotional during the negotiation process.

Again, we want your home buying experience to be as stress-free and easy as possible, so by doing just these simple things you could be light years ahead of your competition. Call us today to get started or browse listings on our website for free.

7 Open House Red Flags to Know Before Touring Open Houses

June 20, 2016 by admin Leave a Comment

The weather is perfect is a great time to be browsing open houses and touring neighborhoods. However, if you are there are some serious red flags on the home you should know about when looking at these open houses.

#1. Multiple homes for sale in the neighborhood.

If more than 20% of the homes in the neighborhood are for sale, there may be a reason why. It might not be coincidence. Neighbors may know of large construction coming in, problems in the area or bad schools. Talk to the neighbors and find out what’s going on and why so many homes are for sale.

#2. Strange odors.

If you walk in a home and there’s an odor you can’t quite put your on, it could be something hazardous or toxic. If homes have basements make sure they don’t smell musty or molding. This could be a sign of some serious water damage.

#3. Off-limits rooms.

If you’re touring at an open house and a couple of the rooms are unavailable, this could be a problem. If you can’t see all of the rooms you certainly don’t want to get involved in the sale. Ask why a room is off-limits as it could be something as simple as conserving heating or cooling or even just some storage. However, make sure you ask about it and verify it if you are considering buying the house.

#4. Recent renovations.

Homeowners are known for making some quick renovations to make their home more appealing but fast work could come at a price to you. If they’ve cut corners, used cheap materials or did the work without a building permit, you could be up a creek once you own the house.

#5. Peeling paint or holes.

Rot, moisture or old paint can cause numerous problems in the house so you want to make sure that the paint is fresh, not peeling, old, bubbling or stained in certain areas.

#6. Odd additions.

There are renovations and remodels that can leave a home looking like it’s missing certain puzzle pieces. If the home has some odd additions it may actually lower the value instead of increasing it. Ask the listing agent when the additions were created and if the proper permits were acquired.

#7. Bad neighbors.

Take a look at the rest of the neighborhood when touring an open house. Are the neighbors yelling at each other or their kids? Do they take care of their front lawns and curb appeal? Are there numerous junk cars in the front lawn? All of these could give you an insight as to what your neighbors might be like. If everything looks perfect, do a drive-by of the neighborhood when there is no open house and see if things are as well put together.

Armed with these simple things you can make the most of your open house tour. Need a list of all of the open houses coming up this weekend? Contact me below and let’s get started.