How Much is Enough? Earnest Money Deposits
January 15, 2007
The earnest money deposit accompanies your offer to purchase real property and is a reflection of two things: your interest in the property and your financial ability to buy the property. While there is no customary amount or percentage, I use the following guidelines when counseling clients on how much of an earnest money deposit to give.
When to Put Down the Minimum. If you don’t have a lot of cash on hand, put down as little as possible. I’ve had clients put down as little as $1,000, with the entire amount refunded at closing time. These clients are almost always first time buyers, sometimes using FHA or VA insured loans. Sellers in the lower to middle end of the market are accustomed to this amount and if the listing agent complains, too bad.
Another reason not to put a large downpayment down is if there is any chance you might change your mind about buying the house. I have never had this happen but I always tell people that there is no contingency in the contract for mood swings.
When to Put More Money Down. If you really want to communicate to the sellers that you want to buy their house, it’s a competitive seller’s market or if you’re asking the seller to come down on the price significantly, put a considerable deposit down. I’ve had clients put down anywhere from 1% to 5% of the final purchase price.
Putting more of a deposit down doesn’t impact the sellers directly. However, a larger deposit can make you stand apart from other buyers, can increase the confidence the sellers have knowing that you have a substantial amount of money at stake, and convince sellers to take less money if they know you’re truly serious.
Essentially, your earnest money deposit depends on your interest in the property and your ability to come up with the money. Talk to your agent who can help you figure out the best strategy.
Entry Filed under: Agent, Buyer's Agent, Buying a House, Connecticut, First time home buyer, Real Estate. .
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1. Susan | January 16, 2007 at 8:17 pm
I just came across your blog and was instantly riveted by the all the great info and your delightful writing style. I have been trying to find a suitable home since moving here a year ago and am deeply grateful, thank you!
2. berealct | January 16, 2007 at 10:26 pm
Thanks and welcome to the neighborhood.
3. Jon S. | March 6, 2007 at 3:01 pm
Hello, I’ve been an agent for about 5 years and am just now realizing that %10 earnest money as a practice in our area must be high! Is that the case? I am having a buyer tell me that he only wants to do 1%
4. berealct | March 7, 2007 at 1:23 am
In Fairfield County, buyers generally put down 10%. In the rest of Connecticut, it can be as little as $1000 – it just depends. If you’re putting less down than is custom in the area, then buyers should have a good explanation or make the rest of their offer stronger.
5. John P. Gauvin | February 9, 2008 at 11:33 pm
What is Ct. State law with regards to Earnist Money being deposited into the Buyers Escrow Account.
I went into a sales agreement with a group of investors. They brought a check of $100,000.00 at the closing. Their Lawyer took the check and sat on the check, never deposited into his escrow account.
How I found out was that we all got together and had another meeting with regards to the property and the Lawyer opened up the folder that he had compliled on the sale agreement and there was the deposit check stapled to the inside of the folder. After the lawyer realized that the check was there he put his hand over the check to cover it up. He then proceeded to push down on the check to try to seperate it from the folder he stapled it to . Once it finlly broke free from the three staples that held it to the folder he then slid it under a pile of paperwork to hide it from my eyes. To Late. I watched the whole thing. I kept my mouth shout, finished the meeting and left.
The same day I spoke to a freind he buy’s and sell;s Real Estate in Ct. and he told me that the lawyer by law had to deposit the check into an account within 72 hours of the signing. The amount of time that had pasted was over 5 weeks.
I want to know what the law really is. This is a 3 million dollar deal.
The folks that are buying the property are from R.I., The property that I am selling is in CT. I have been seeking a new attorney and I am up in the air without a Ct. attorney right now.
Let me know by email if you could to solve this question for me. Please.