I can't speak for the rest of the country, but here in Fair Oaks and the Sacramento Area, you write a deposit check at the point you write an offer. But what happens to your deposit next? It depends on the type of home we write the offer on.
A. Regular Sale with a real owner - a Mom and Pop sale - In this scenario you typically write your deposit check for 1% of the purchase price, made out to the Escrow Company. (so $2,000 on a $200,000 offer price). This is your "Good Faith Deposit" to show you are acting in good faith.
If the offer is not accepted, you get your uncashed check back.
If it IS accepted, the contract will state how many days you have to deposit the check into escrow - but generally right away. So now it is cashed.
You will generally have a contingency period to remove your loan and inspection contingency. Let's say that is 17 days. At the end of the 17 days you will either say:
1. "Yep, I'm buying this house - Woo Hoo", and remove your contingencies, meaning that if you now change your mind, you lose your deposit. That's fair.
OR.... You'll say...
2. "Hmmm. I DO want to buy this house but only if you fix such and such. If you'll fix it, I'll remove my contingencies and buy your home". If they agree, you remove the contingencies, and now if you change your mind, you lose your deposit. If they don't agree, you will choose to either proceed anyway, grumbling probably, or back out of the contract and get your deposit back.
OR... You'll say...
3. "Are you kidding - this house has WAY too many problems, and I'm not buying it - give me back my money."
B. REO purchase. When buying a bank foreclosure, the process is basically the same as above, although the banks usually shorten the time period for your inspections to 10 days. And they are serious.
C. Short Sale - Now it gets a little trickier. Here, it depends on the requirements of the seller and his agent. For most short sales, your deposit check will sit in your agent's trust account, uncashed, until you have approval from the short sale bank. Then you proceed as in A above, and your check gets cahsed.
But many agents and short sale owners will require right up front that you have some skin in the game. They make you cash your check right away, while you wait for the bank approval. This gives them a stronger assurance that you will wait for the short sale approval, and be there for the long haul. It may take a month or 4 months or longer. Generally, if you give up for any reason up until the bank gives acceptance, you will get your check back. But once you get bank approval, you proceed as in A.
Does this all make sense? Ulitimately it's all negotiable, and you will know every step of the way what you are agreeing to. You shouldn't make offers will-nilly because you need a separate check for each offer, and you need the funds in that account to back it up.
Thanks BigStockPhotos
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