The very thought of buying a home can be scary if you don’t have the right agent by your side to give you the right direction on how, why, and can I. There are also many financial steps to consider and having the money on hand. From the moment you meet with an agent, you will be given information that requires action to make the transaction go smoothly. When buying a home, there are many financial responsibilities that fall on the buyer to ensure they have the dollars to cover expenses or the deal could fall through. Some of them are:
~ Initial payment
~ Inspection fees
~ Appraisal fees
~ Sure
~ Deposit
Let’s consider the last one, the money in guarantee. Why is this so important to the transaction? You are probably thinking that I am already providing the seller with my pre-approval letter showing that the bank has reviewed my financial situation and agrees that the offer I am making to the seller is within my budget.
So why should I provide the seller with a warranty check as well? This will show the seller your true intention to move forward with the sale. Surety checks can vary in amounts based on the bid price you are making to the seller. Most agents will tell you that 10% of the offer price must equal the amount of the surety check. This check (unless you are bidding on a short sale home) should be deposited into the seller’s escrow account within 3 days of the offer. If you are conducting an inspection, you can include terms in the contract that stipulate that the surety check will NOT be deposited into the account until the inspection contingency is removed from the contract. The reason for this contingency would protect the buyer to make sure that if something shows up negatively on the inspection and the buyer decides to walk away from the property, they could void the check and move on. Some brokerages will stipulate that they don’t have to return your check until 30 days after cancellation, so be sure to ask what the selling brokers’ return policy is before bidding and turning in your check. Once the check is delivered, it will be deposited immediately in most situations. So make sure you have the dollars in the account to cover your check.
What this check shows the sellers is their full commitment to purchase their property. The lower your check, the seller may be hesitant to move the home to MLS pending status for fear of losing other potential buyers. So when you’re preparing to write the check, make sure your TRUE intentions are reflected in the price of your check.
The other thing to remember is that once you and the seller have signed all the documents, all contingencies have been eliminated, and all CIC document deadlines have passed (if applicable), your ability to receive these funds in full or not at all is not in your favor. However, if something changes in your financing capacity and your contract indicates in advance that if for some reason the financing cannot be made, the buyer must receive all the money from the deposit, this money no longer exists. The seller can also prosecute you, your agent, and your broker legally for any other fees or money the seller put into the property or deal to fulfill their end of the contract.
What to remember, once you sign all the contracts, it will be in a legally binding contract. It’s as easy as that. If you really want the house you are bidding on, show your strength and all your interests in how much of your personal money you are willing to put up with the surety check.
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