This is part one of a series for first time buyers - earnest money deposits

As a first time buyer there are several things to make yourself familiar with. Because of the offer process, the purchase of real estate is different from most other purchases you'll make . Unlike shopping at the local store where prices are fixed, buyers make offers on real estate at the price and terms they deem appropriate, which the seller may either accept of reject.

Though acceptance is not guaranteed, even when a full priced offer is made, an appropriate earnest money deposit can help. An earnest money deposit is typically submitted along with an offer to purchase real estate to hedge a seller's risks and show you're serious. If you've ever bought a piece of jewelery or similar merchandise you're likely already familiar with deposits. Real estate is no different. Just like a jeweler needs a deposit to hold an expensive ring the home seller is more likely to accept your offer with an appropriate earnest money deposit.

As a buyer if you change your mind, without reasons outlined in the offer you'll most likely lose your deposit. Think about it from a seller's point of view. When they accept your offer it may take 30 days or more for the property to actually close and be transferred out of their name. Without a deposit on the property a buyer could change his or her mind at the closing table and walk away from the transaction with little or no loss, except the threat of lawsuit. The seller on the other hand has lost valuable time on market, maybe a mortgage payment, utilities, taxes, possibly moving expenses and who knows how many potential buyers for the property. Most sellers require a deposit.

How much is an appropriate earnest money deposit? Although I've heard many agents suggest 1 percent of the purchase price, there really is no steadfast rule. It depends on many factors like local customs and market conditions, the price range, specifics of the offer, the sellers requirements, etc. Please consult your local real estate agent on the appropriate amount to submit and the risks of losing your deposit before submitting your offer.

Keep in mind, I practice in the Fayetteville NC real estate market. Please contact a local agent for information regarding markets other than Fayetteville North Carolina.

For more information on earnest money deposits the North Carolina Real Estate Commission has a handy brochure at their website



Copyright 2007 Ron Allen Fayetteville NC Real Estate all rights reserved