You Are Ready To Sign A Maine Purchase And Sale Agreement...How Much Deposit Is Needed?

By
Real Estate Agent with MOOERS REALTY ME Broker License 106759

   

If you read the ABC's of real estate books, the ones called "Real Estate For Dummies", etc you get down payment advice from a dollar to the entire purchase price as options.

The entire amount in cash would be a dramatic statement to make in a multiple offer situation to say "pick me pick me" as a real stand out buyer. To say traditionally it is always this or that amount does not reflect the different elements of every real maine sunset,atv 4 wheelerestate transaction. Like people, transactions are different. If there are 37 listed contingencies on a purchase and sale agreement, a seller may say pass in signing that contract at all. And the deposit size is immaterial.

You want the sale to happen, not the deposit forfeiture in reality right?

True if the buyer walks after weeks, or months of delay in the sale that suddenly is not happening, the sting, or reward for the wait is the deposit.

     It is the quarters in the parking meter so to speak to buy time to meet raising money, conclusion of sale of existing home, getting a job verification or word or the job transfer really happening. Waiting until it looks like the sale is likely to happen is wise rather than just taking a deposit and then parking the deal. Rust happens as the time passes. Folks start to wonder what's wrong in the sale that does not wrap up. Oh sure you can continue to show the place, or land, or whatever it is but that news to the next buyer that the place is under contract can make him ask you point blank to just show property that is available to buy TODAY if he likes it. Not ones that might fall apart but that are weeks away from that derailment. Time is money. Most folks that are serious are not looking for a side order of real estate drama to go with the deal. This is serious stuff, kids changing schools, packing, unpacking, waiting and life suspended in time, put on hold.

      If the buyer can not buy, figure it out early and get them out of the picture so you are free to sell to someone who is. The size of the deposit may not matter as much beyond the psychology of it all, or the symbolism. Deposits that are a million dollars, if one of those row after row of "if"'s, the contingencies cause a snag that can not be smoothed out, resolved means give it back. Or hire a posse of lawyers to find over it, tie up the property and waste part of your real estate day..with tempers flaring on both sides. Give it over to the courts if you can or put on a helmet, keep your head down in the real estate fox hole. The less loop holes, the shorter the time to close means it is simpler for all parties to absorb and see clearly.

     A dollar down with the old Farmers Home Administration (FmHA) contracts was the norm and I was told in MA they collected $10 back in the 1980's. The home loan was a dollar down proposition so the dollar carried more significance that what it would buy at a local store. Despite what the books say as a guide, the deposit has to be large enough for the buyer to raise and part with so show his good faith and intentions in the sale. And it has to be large enough for the seller to take the offer serious and to remove the property from the open market while the title is checked, bank hurdles cleared and that pesky list of "other" contingencies. As a real estate broker guiding the process, you quickly but professional get the obstacles cleared or dealt with head on as issues comes up needing resolution. This is but one of the daily activities that real estate brokers have on their plate day in and day out. It is not take a deposit and waltz to a closing except in the movies. It takes work, experience, perserverance, all the parties on the same page working together. All while several clocks are ticking..those time frames of the  buyer, seller, bank, and whatever other elements add more time frames to consider, work around in the transaction.

     maine lake sunriseThe buyer and seller decide what is needed deposit wise based on what each party has to work with for tolerance, patience and resources. That is why explaining the process, time frame and nuts/bolts of the real estate transaction to all parties is key to keep them out of the dark. Lack of knowledge causes misunderstandings. Jumping to conclusions happens with lack of communication.

     The real estate deposit is sacred though and gets parked quickly in to a real estate broker's trust account until closing.

     If the amount of the deposit is enough to warrant making it interest bearing and clearly spelled out who the interest accrues to, this is a further option for that sale that will not close for six months or longer.

The longer the time frame involved in a closing, the larger the deposit needed to make the delay prudent to enter in to. Or painful enough if someone bails out, pulls the ripcord and parachutes.

Many times the delay is for tax considerations. One party or both may benefit with a "not before January 2nd closing date" clause in the purchase and sale hammered out between the parties with careful revisions and racket tightening language to avoid misunderstandings, confusion. The older real estate books call for a ten percent deposit across the board. No matter what is being bought. But that was back in the days when you saved up the 25% down payment to purchase. There was no need for mortgage insurance. There was no secondary mortgage market or exotic lending options for less than perfect credit borrowers. Buyers were not graded like diamonds are. Either you had good credit or you did not. And co-signers were rounded up if you were a little ligth in the credit department to tip the scales in your favor. Character loans were made on the local level based on local experience with the players involved.

Maine REALTOR Andrew Mooers

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