Q: When I buy a house, do I have to pay an earnest deposit in addition to the down payment that the bank requires? If so, how much is it? And if something happens and I can’t buy the house, do the sellers get to keep that money?
A: You are NOT required to pay an earnest deposit. However, most sellers won’t even consider your offer as a serious one without it. The earnest deposit is not a set amount and is definitely negotiable. Generally, 1% of the purchase price would be considered a fair deposit. However, if the Seller thinks the deposit you offered isn’t enough, it is not uncommon for them to request an amount that they feel comfortable with, via a counter-offer.
Your earnest deposit is NOT in addition to the down payment that your bank requires of you (with the exception of zero down programs like VA).
For example, let’s say you’re getting an FHA loan and your lender requires that you put 3.5% down. If you’re buying a house for $100,000, you’ll be required to put $3,500 down. If you give the seller a $1,000 earnest deposit, you would then only have to bring $2,500 into closing.
As for the return of the money should the closing not occur, it depends on if it is due to the fault of the seller or buyer, as well as what is stated in the contract. This is why it is best to have a professional Real Estate Agent or an Attorney review the contract, prior to making the offer, to make sure that specific scenarios are addressed. Otherwise, if there is a dispute, the title company will not release the funds to either party without written consent from both buyer and seller, or a court order or arbitration ruling.
There are several other points and issues regarding earnest deposits, so if you have additional questions or if you would like more information, please contact me.