| |
In your real estate contract, there should be a
provision for the buyer to deposit into escrow a predetermined amount of
money that he or she pledges with the offer. The purpose of this
money is to show that the buyer is making a good faith effort to
purchase your home. As it should be specified in the contract, you
will probably have safeguards to protect yourself in the contract that
will specify that the buyer will lose this money if they breach the
contract or decide to back out of the deal. The buyer, on the
other hand, will probably want provisions protecting his or her money in
case you renege on the deal or if the appraisal comes in lower than the
agreed upon sales price.
In Arizona, the amount of money that is customarily
accepted by sellers will vary. One rule of thumb to remember when
deciding how much money you want to accept is to ask yourself the
following question, "How much money am I willing to accept to take my
home off of the market for this buyer?" Generally, most sellers
will accept $500 from a buyer if the home is priced at $150,000 or less,
$1,000 for homes priced between $150,000 to $300,000 and one to five
percent for homes price above $300,000. When deciding how much to
require the buyer to deposit, the more the buyer pays upfront, the less
likely they are to back out of the transaction.
The exact amount you collect from a buyer will vary
upon the circumstances surrounding the contract. If you have a
buyer that wants you to complete expensive repairs to the home prior to
the closing date, you may require a large, non-refundable deposit from
the buyer that you keep regardless if the buyer purchases the home or
not, for whatever reason. In addition, you may require the buyer
to deposit more money than he or she has on hand. It is possible
to have the buyer make payments over a period of time or through a small
payment initially and a lump sum by a specific date.
It is advisable to have the buyer have the funds
made out to the agreed upon escrow company. The money is usually
deposited with a neutral third party, such as an escrow company, so that
there is not a conflict of interest with the buyer or seller.
As stated before, most real estate contracts will
include provisions for both the buyer and the seller that dictate how
the earnest money is to be dispersed if one or the other party breaches
the contract.
Buyers can usually expect to receive the earnest
money deposit back if 1) after a good faith effort to qualify for a home
loan, they fail to do so, 2) the home does not appraise for the agreed
upon sales price, 3) a home inspection reveals material problems with
the home that makes them want to back out of the contract, or 4) the
seller breaches the contract. Sellers can expect to receive the
earnest money deposit if the buyer breaches the contract for most any
reason other than those mentioned above.
|
