Dear Sherilin,

Your purchase contract is not firm until you have the lender's sign off. So there is no point in spending money on the cost of an inspection and appraisal until the contract has been approved. Your contract should say attorney and inspection contingency are 5 business days (or something similar) following bank approval. That way you are clear that the meter on those contingencies does not start running until your contract is solid.

Regarding earnest money, most lenders want to see earnest money with their offer as a sign that you are a serious buyer and not randomly making offers all over town. Typically $1,000 should suffice. Your initial earnest money should be immediately returned to you after both the buyer and the seller sign a release in the event the bank does not approve the sale.

The earnest money is customarily increased after your have completed the attorney and inspection contingency period, which should follow bank approval. In Chicago, total earnest money is typically of 5% – 10% of the purchase price, and serves as the seller (or in this case the bank’s) insurance that you will indeed close on the property.

Best of luck,

Jenny Ames

I recommend ordering an inspection/appraisal after everything else is approved. In my experience, the buyers do not even put any earnest money into the transaction until its approved with the lender. The lender is the only one who can guarantee the purchase price. Don't waste your money until you obtain a written approval from the lender. This process can take up to 90 days, so be patient.

Good luck with everything and hope this helps.