Initial Deposit


Every time I prepare an offer for a client, we have a discussion about the deposit.  Why is it so much, where does the money go, and oftentimes: Can I deposit less? 

Every area has its customs.  In San Mateo County, the standard deposit check is 3% of the purchase price.  With all contracts, there must be consideration.  You give them the money; they give you the house.  One reason for the 3% is that the agent representing the seller wants to insure that you have the ability to purchase the house.  If you don’t have that 3% it’s going to create doubt that you can actually buy the house.  Secondly, there’s a liquidated damages clause in the contract which, in essence, states that if you should default from the contract after you have removed your contingencies, the seller may sue you for damages.  What’s the most they can get out of you?  3% of the purchase price.  The seller’s agent is going to try to make sure that all that money is available to their client should you change your mind later than you should have. 

In some areas, the standard is $1000 or maybe $5000.  That’s usually where the houses aren’t priced quite as high.  In the San Mateo area you’re talking about a $750,000 median price.  Asking a seller to hold their property for you for 500 or $1000 isn’t going to make them warm and fuzzy. 

Those funds are held by the escrow company; a neutral third party who actually takes instructions from you!  Well, from me, but I work for you.  If you and the seller don’t agree, then the money doesn’t get released.  It stays in that account until you agree, whether that’s to buy the house or not.

Vicki Moore About Vicki Moore

Office:
RE/MAX Star Properties
282 Redwood Shores Parkway
Redwood Shores, CA 94065

By Phone:
650.888.9268

Comments

  1. March – sell house for 1.2 million – $100K deposit.
    Mid April – Buyer crying, gives me a letter saying he will not be completing on the purchase.
    Seller says thanks for the $100K – oh by the way, we’re suing you for the balance plus costs. Seller wins all the way.

    Quoting Barreta: “if you can’t do the time don’t do the crime”

    Now that is very warm and fuzzy.

  2. Vicki Moore Vicki Moore says:

    Larry – That’s funny. You know – a total side note – my tax guy has the actual bird from the show at his office.

    Your humor is the best!

Speak Your Mind

*