First-Time Kenai Home Buyers: Don’t Make These Earnest Money Deposit Mistakes
First-time Kenai home buyers have heard of a down payment, but many do not know what earnest money deposit is. As a Kenai buyer you will most likely be required to make this deposit so it is important that you understand what it is so you don’t make any mistakes.
To help get started, here are several things that Kenai home buyers need to know.
What is an earnest money deposit?
An earnest money deposit is money that a Kenai buyer puts on the line when they make an offer on a house. This deposit usually equals 1 to 2% of the purchase price of the house. However, it can also be upwards to 10%.
The purpose of this deposit is to show the seller that you are serious as a buyer. A third party holds the money. If the seller does not hold up their end of the deal, the buyer receives the money back. And, if the buyer does not hold up their end of the deal and the seller receives the money.
How to determine how much earnest money deposit to put down
The amount of the earnest money deposit that you make as a buyer will depend on the current Kenai market condition. In a hot seller’s market, you will want to make a larger deposit. This shows the seller how serious you are and can put your offer above the others that they have received.
However, you want to keep in mind that if you default on your portion of the deal that you will lose that money. That means if you move forward with purchasing another Kenai house, you will have to come up with additional money as your earnest money deposit.
Do not give up your contingencies
Contingencies such as home inspection and home appraisal help protect you as the buyer. If you back out of the deal because of something that comes up with the home inspection or appraisal and you have the contingency written into the offer you will receive your earnest money deposit back.
However, if you allow the seller to talk you out of removing the contingencies from your offer then that will not be in place to protect you. That means if you get too far into the process and find out that there is a major problem with the Kenai house, you still have to go through with the deal or you lose your deposit.
Know what your risks are
If you are making an earnest money deposit on a Kenai house that is being sold “as is,” you need to make sure you understand what that means. You will not have a contingency of a home inspection to fall back on. You are agreeing to purchase the house in the exact condition that it is in regardless of the problems. That means your deposit is not refundable.
Know when to walk away
It’s not easy to walk away from your earnest money deposit, but sometimes it’s the best decision. If you have found that going through with the deal on buying the Kenai house is truly not in your best interest, then it’s better to lose the money than to purchase a house that you don’t want, or you can’t afford.
This is a tough lesson to learn, but there are times when it is unavoidable for some Kenai home buyers. In the long run the earnest money deposit is going to be less than what you will spend if you go through with the house that you should not buy.
If you have any questions on your earnest money deposit, make sure to ask. Before writing an offer on a Kenai house make sure that you understand what deposit you are going to be making and what will allow you to back out of the deal without losing that deposit. The more you understand before making the offer the more comfortable you will be as the process continues.