Importance of Deposits
Posted by admin on April 28, 2011 | No Comments
When making an offer to purchase, it is a good idea to show your sincerity by offering as good a deposit as possible. Sellers look most favorably at offers that give them peace of mind.
Every aspect of an offer effects the seller. For instance, if your offer is subject to financing the seller is aware that they cannot be sure your offer will become firm. The same thing applies if you have made your offer “subject to the sale of your present home”. Again, your offer is not a “sure thing” to the seller. All conditions have some effect on the confidence of the seller. The more confident you can make the seller, the more favorably the seller looks at your offer. Deposits are a vital part of this picture.
(I am not suggesting for even a minute that you should refrain from putting your necessary conditions on your offers. You absolutely need the protection these clauses provide. i.e. subject to home inspection, financing, sale of home etc.)
If you tender a poor deposit , the seller is less assured that they can rely on you. Alternately, if you offer a generous deposit, the seller knows you mean business.
Remember to, that most sellers will become buyers themselves, as soon as they accomplish a sale on their present home. If a sturdy deposit is part of the contract of sale on their existing home, they can go forward to buy, having the necessary faith that nothing is likely to happen to their sale.
In our area, deposits are sometimes tendered in two parts. A small amount of perhaps only $1000 at the time of the offer, and then significantly more, often $9000 to $20,000, when you remove your conditions and make your offer firm and binding. This practice works quite well as it keeps the buyer from surrendering savings account interest or avoiding borrowing charges until and unless they are actually going ahead with their purchase. Deposits are often even larger on more expensive properties.
Your deposit is not an added expense. Rather it forms part of your purchase price and it goes towards the monies you will need to complete the transaction.
Deposits are not paid to the seller until the property actually goes into the buyers’ name. Instead, they are typically held in trust by the buyer’s real estate company. In private sales, notaries or lawyers hold the deposit monies in trust.
In the United States, they call deposits “Earnest Money”. That pretty much says it all, does it not?
Jane Field works with RE/MAX Vernon. To suggest topics for future articles or to ask Jane questions, email her at jane@vernonrealestate.ca or call 250.503.3755. Previous articles published in the Morning Star appear on Jane’s website – www.vernonrealestate.ca
Filed Under: Buyers, Vernon Real Estate
