Your home has been on the market and we receive word an offer is being submitted on your home for sale in Lancaster. You ask, “What is this earnest money deposit?”
Earnest money is the money deposited with the contract to show the
buyer’s good faith intention to perform the duties of the real estate contract. The lower the amount of deposit, the lower the risk to the buyer if he or she fails to buy your house. This money is refundable to the buyer if the contract is terminated for reasons stated and allowed in the contract, like the inspection contingency. This money is also used towards the purchase of the home.
As a seller of a home for sale in Lancaster, you desire the deposit to be as large as possible. View this money as the incentive to accept the contract, take your home off the market and to wait for the buyer to get his or her ducks in a row. This factor is too often overlooked by inexperienced agents and sellers. However, you will not overlook it because you are a wise seller.
There are several factors which help you the seller understand the negotiations of the earnest money deposit.
Is there a financing contingency?
What type of financing?
When is settlement?
If the buyer is paying cash, then getting a larger deposit is more likely than the buyer who is using 100% financing. However, it never hurts to ask the buyer for a larger earnest money deposit.
As a rule of thumb, I will advise you as seller to ask for 5% of the sales price for the earnest money deposit, but realize 1-2% is more realistic.