Home > Blogs > Margaret Woda > Real Estate The Woda Way

How Much Deposit Will I Need to Buy a Crofton Home?

Real Estate Agent with Long & Foster Real Estate, Inc.

February 22, 2013 09:49 PM

Real Estate FAQ

Q. Is an up-front deposit necessary when I find and buy a home in the greater Crofton MD area? If so, how much?

A. The short answer to your first question is "Yes, you will need to submit an earnest money deposit when you make an offer on a home."

The answer to "How much?" is not quite so simple. There isn't any written guideline that I'm aware of and no hard and fast rule. In fact, the amount of earnest money deposit may boil down to what the seller requires before he will take his home off the market for you. I had one case where the sellers accepted as little as $1, but don't count on that... it was once in 40 years!

In my experience, 1% of the sale price seems to be customary for any home in the greater Crofton area. That would be a $1,000 earnest money deposit for a $100,000 home (if you could find one priced that low in this area) or a $3,500 deposit on a $350,000 home. There are exceptions to this, of course: A highly motivated buyer in a competing bid situation might be inclined to double or even triple that amount with their offer, or a buyer and seller may agree on a something less than 1%. The amount of earnest money deposit is totally negotiable.

For more information, be sure to read Paragraph 18 of the Maryland Association of REALTORS standard Contract of Sale, which spellls out in some detail what happens to your deposit from the moment you write the offer.

View more Real Estate Questions and Answers at FocusOnCrofton.com

Originally posted to FocusOnCrofton.com on 2/22/13

Re-Blog

Featured

Comments (14)
Subscribe to Comments Comment

Show All Comments

Sort:

Chris and Dick Dovorany

Homes for Sale in Naples, Bonita Springs and Estero, Florida - Naples, FL

Broker/Associate at Premiere Plus Realty

Ernest money is whatever is offered and accepted. In Florida there is no law that requires ernest money. Little known fact.

Feb 22, 2013 10:05 PM

Margaret Woda

Long & Foster Real Estate, Inc. - Crofton, MD

Maryland Real Estate & Military Relocation

Chirs and Dick - While I'm not an attorney and I can't swear this to be correct, it's my understanding that "consideration" is necessary for a contract in Maryland. Right now, I have a short sale under contract with a $10 deposit which will be upped to a larger amount upon bank approval of the short sale. The majority of home sale offers in my market are accompanied by a 1% earnest money deposit. Of course, this varies across the country and even from case to case.

Feb 22, 2013 10:13 PM

Brenda Mayette

Miranda Real Estate Group, Inc. - Glenville, NY

Getting results w/ knowledge & know-how!

1% is standard in NY's Capital Region too. Buyers often confuse earnest $ with the money down requirement of their mortgage...

Feb 22, 2013 10:18 PM

Richie Alan Naggar

people first...then business Ran Right Realty - Riverside, CA

agent & author

It is really used to demonstrate someones desire or seriousness in moving forward on their proposal..Today, being pre-approved accompanied by the appropriate behavior makes earnest money mean something...good post here

Feb 22, 2013 11:11 PM

Wika Hutchinson

Eugene, OR

Broker, CRIS, SFR, CDPE

There is no guideline on how much earnest money is required here in Oregon. When working with buyers, I usually suggest somewhere around 1% or whathever amount they feel comfortable with. The seller can counter it if he/she think the EM is too low.

Feb 23, 2013 01:29 AM

Gary L. Waters Broker Associate, Bucci Realty

Bucci Realty, Inc. - Melbourne, FL

Eighteen Years Experience in Brevard County

I always answer it the same way...enough to let the seller know you are serious but not so much that you would not be afraid to walk from if something strange happens!

Feb 23, 2013 02:07 AM

Margaret Woda

Long & Foster Real Estate, Inc. - Crofton, MD

Maryland Real Estate & Military Relocation

Brenda, that's interesting. It's a number that makes sense with most offers, but maybe that's because I'm accustomed to it here. Years ago, it was common to make a deposit with a promissory note, but I haven't seen those in years.

Thanks, Richie. It's always interesting to see how sellers are swayed by the amount of earnest money deposit. In a competitive bid situation, a higher deposit can tip the scale in one buyer's favor or another with a lower deposit.

Wike, good point! The seller can always counter on the earnest money deposit amount. Funny, though, how buyers dig in their heels when it comes to the deposit.

Gary, very clear! The truth is that most sellers will release the deposit so there's no obstacle to selling the property to another buyer. Again, I'm not an attorney, but it's my understanding that an unreleased deposit impacts the title. This may vary from state to state.

Feb 23, 2013 04:53 AM

1~Judi Barrett

Integrity Real Estate Services 116 SE AVE N, Idabel, OK 74745 - Idabel, OK

BS Ed, Integrity Real Estate Services -IDABEL OK

Sounds like 1% of the contract price is fairly common in many areas. Quite common here too.

Feb 23, 2013 08:46 AM

Praful Thakkar

LAER Realty Partners - Burlington, MA

Metro Boston Homes For Sale

Margaret, if I remember correctly, VA still offers 103% of price as a loan amount - though it's very regulated. In such cases, the deposit from the buyer will be more of a formality.

And I hope they still control the financing or else....

Feb 23, 2013 01:45 PM

Potranco Realty

Potranco Realty - San Antonio, TX

"Sold with Potranco Realty"

Margaret, Consideration is what ever a Seller will consider typically our Sellers do require at least 1% sales price earnest money.. if a buyer is serious then they should show much consideration. A hand shake is considered consideration but 99.99% of time in real estate it's $$$$$$ to show true consideration and get a Seller to accept an offer. have a beautiful Sunday ...

Feb 23, 2013 08:02 PM

Margaret Woda

Long & Foster Real Estate, Inc. - Crofton, MD

Maryland Real Estate & Military Relocation

Interesting, Judi.

Praful, there are 3 military installations within a half hour of Crofton, so a lot of our buyers are VA. But they still have a lot of closing costs unless they negotiate with the seller to pay them. If the deposit exceeds the cash they need for closing, they get any balance at closing, but I doubt a seller would accept their offer without an earnest money deposit. (Congratulations on becoming an Ambassador!)

Peter, that's a strong deposit in this area, not the norm... but I know it varies in different parts of the country.

Bob, I guess you could use a bushel of apples as consideration, strictly speaking, but not many sellers would accept that and I'm not exactly sure how that would fit in with the Maryland Association of REALORS standard Contract of Sale, which talks about depositing the EMD in an escrow account and applying it to the buyers costs at closing. LOL. Maybe that's why it's $$$$$$ 9999% of the time. LOL.

Feb 23, 2013 09:27 PM

John Juarez

The Medford Real Estate Team - Fremont, CA

ePRO, SRES, GRI, PMN

I would say that 1% of the contract price is the absolute minimum. The point of earnest money is to show that you are “earnest”. One definition of “earnest” is “serious”. If the buyer is serious about the purchase a larger amount shows that the buyer is more serious than a smaller amount.

There is no law that requires a deposit in order to have a contract but I would not consider a buyer who does not offer a reasonable deposit to be a serious buyer.

The contractual promises made in a California purchase contract are considered to be adequate consideration, by the way, even if no cash earnest money is offered.

Feb 24, 2013 12:11 AM

Lloyd Binen

Certified Realty Services - Saratoga, CA

Silicon Valley Realtor since 1976; 408-373-4411

Margaret, an experienced listing agents interprets a large deposit as a demonstration of Earnestness. in Santa Clara county which is home to 75% of Silicon Valley it depends on the desirability of the area. In the desirable areas, 3% is customary. That's the maximum allowable under liquidated damages for 1-4 owner-occupied units. In less desirable areas 1% may work okay. The days of personal Notes and "irrevocably escrow demands" are long gone.

Feb 24, 2013 03:16 AM

Margaret Woda

Long & Foster Real Estate, Inc. - Crofton, MD

Maryland Real Estate & Military Relocation

John, you're right, the deposit expresses just how EARNEST a buyer is. When you have 2 offers in hand for the same property, the earnest money deposit just might be the deciding factor because the higher amount shows the buyer to be more "earnest."

Lloyd, I've heard "3%" from a few other people on Activerain in other parts of the country. I wouldn't be surprised to see that become more common in this area. For now, though, the 1% is a big improvement over the $1,000 that was fairly common for years.

Feb 24, 2013 08:35 AM