Home Buying in New Jersey>Question Details

Franciso, Home Buyer in Edison, NJ

****BUYING A HOME - QUESTION REGARDING GOOD FAITH DEPOST****

Asked by Franciso, Edison, NJ Fri Sep 19, 2008

Hello all,

Well I posted some time ago that I made an offer on a home my wife and I absolutely love and the sellers countered with an out of reach number. We decided to walk away and give it some time to think about it. Well my LA calls me up and tells me that they have decided to accept the original offer but they need more than the $600.00 "Good Faith" deposit so they know I'm serious. She said that they are asking for $4,000.00 for the good faith portion. Does that sound reasonable or realistic? I have the contract in hand and am going to see my attorney on Monday, but I want get your feedback on this situation. I'm assuming that this $4,000 will be applied to my down payment - that is how it is written in my contract for example if I was putting down 20,000, the contract says 4,000 deposit and 16,000 due at closing. Any thoughts??



As usual thanks!!!

Help the community by answering this question:

Answers

10
I usually see $500-$1000. More happens but not often.
Web Reference: http://www.stevekappre.com
0 votes Thank Flag Link Tue Nov 25, 2008
Franciso,

Normally a $1000 GFD is all you need. If you do decide to give the $4000 GFD, make sure you have your attorney keep it in a trust acoount they set up for you. Under no circumstances do you let the seller's or their agent or attorney demand that they hold the money. If something goes wrong during the transaction, you might have a difficult time getting it back.
0 votes Thank Flag Link Sun Sep 21, 2008
While $4000 is not unreasonable, try for $2500 or $3000. It is likely they will accept that. In any case I am curious about how the initial offer with a $600. earnest money deposit came about. I only represent buyers and while I would not refuse (could not) to present an offer with that low of an earnest money deposit (exceptions are rare but exist) I think in general it makes the offer look weak. Less is better for a buyer, looks stronger by a seller. For a buyer, everything else being equal, less it better though party because you want to have the ability to place additional offers if you are in a situation where earnest money has been deposited, the deal came apart or never came together and you want to offer on another home before you get the money back.

Paul Howard, Broker
NJHomeBuyer.com Realty 08002
http://www.naeba.org - National Association of Exclusive Buyer Agents
0 votes Thank Flag Link Sat Sep 20, 2008
Francisco: While you specifically said LA in your question, the actually relationship that you have with that agent is not clear from your statement. The advice from Prairie Village, which I assume is from out of state, (Few prairies in NJ) should be discounted. Why it is offered, unless the agent is conversant with NJ law, is a mystery to me. You may indeed have a different relationship than Prairie Village indicates and the easiest way to figure it out is by examining the Consumer Information Statement that should be delivered to you by state law. In this state, there are four types of representation and you would have to figure out which one you had. The agent you are talking should have already discussed this with you and you should get him/her to do so now, if they haven't. Since you are looking for advice in an open forum, I would caution you that, with the amount of money and time and your life style at risk, you get appropriate representation, including legal counsel if you don't know exactly what you are doing.
0 votes Thank Flag Link Sat Sep 20, 2008
Dear Franciso,
In North Jersey , there is no set amount for a good faith deposit. It usually accompanies the contract of offer.

Your offer has been accepted, and your lawyer will start attorney review, from what you have described. The custom here is that 10 days after attorney review is over the balance of 10% is dues from the buyer. (the amount is minus what they have already put down for a deposit with the offer.) It is money you are committing after attorney review is over. You are just giving a little more up front.

Your $4000. goes towards your down payment, yes.

I have had all different amounts used as a deposit with a contract of offer. It is a way of showing the seller your sincerity.

According to your contract, you don't need to have the other 16,000 available until the closing. SO, the seller wanted to see a little more of a commitment from you (n terms of money that you have commited to the deal)
that just the 800.00.

It doesn't seem unreasonable since you don't pay any other money until the closing, according to how you have described your contract.

Good luck with you new home.

Sharon Kozinn
Web Reference: http://sharonkozinn.com
0 votes Thank Flag Link Sat Sep 20, 2008
Any deposit should be at minimum $1000 or up to 1% of the sales price. The amount of deposit can be negotiable if teh seller is asking an unreasonable amount., without knowing the sales price i can not give you what i think the deposit should be. The deposit is then held into an escrow account by the listing broker. The deposit is applied toward sthe amount you will need for either or both your down payment and closing costs. If you have a mortgage contingincy and you get denied, as long as you are within the specified dates you get your deposit back as well if you go beyond teh dates and back out, the deposit is taken from you for damages. good luck with your purchase.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Sat Sep 20, 2008
Francisco: In the standard NJAR contract of sale, there is a recap of the flow of funds, ending in a total that matches the sales price. There is no line entitled "good faith" deposit to begin with and no funds from the buyer that do not get added to the total. What there is, is a deposit BEFORE the seller signs a contract and a deposit afterward. No deposit is specifically required at any time. Some agents think that without a deposit no "consideration" exists and the contract is not valid. In my Business Law 101 class, I was told that consideration is the price of the house and the deed and ownership of the same. The whole deposit could well all be considered "good faith." I often see total deposits of $5,000.00 or more. It's a matter of what makes the buyer and seller happy and creates part of that meeting of the minds that is the essence of a contract. Some sellers want more, some buyers want to put up less but some want to put up more, as if that locks the deal tighter or displays a greater ability to conclude the deal, neither of which is necessarily true.

What you may want to consider is that the deposit MUST go into an escrow account and can't come out except on closing, at an agreement by the two parties or by court order. The more you have up, the less you will have to move on with, should the deal fall apart and you find that you and the seller disagree about how the funds should be disbursed.

Lots of luck with your new home. I hope it works out for you.
0 votes Thank Flag Link Sat Sep 20, 2008
4000 doesn't seem extraordinary for an Earnest Money Deposit.
What concerns me is that you are not represented by a buyer's agent.
The listing agent represents the seller, not you.
0 votes Thank Flag Link Sat Sep 20, 2008
I see no problem with a $4,000 down payment. Insist that the money be held in your attorney's Trust Account or the Trust Account of your agent, not the sellers attorney or agent.

Yes, the money will be used as part of your down payment.

After attorney review the house will be listed in the Multiple Listive Service as 'under contract', effectively taking it off the market. So the sellers want to be sure that you're serious.

Good Luck with your purchase!

Laura Giannotta
Keller Williams Atlantic Shore
0 votes Thank Flag Link Sat Sep 20, 2008
$4000 for an initial good faith deposit is a bit higher than what I normally collect from my buyers, unless they are purchasing a multi=million dollar home. I normally collect $1000 upon presenting the offer (good faith deposit) and then typically a 5-10% (of the purchase price) down payment is due within 10 days out of attorney review.

There is no industry standard and these numbers are always dependent upon what a buyer can afford; however, the seller is looking to see that you are serious and will not walk away from the deal. That being said, the feeling is that most people will be less likely to walk away from a larger deposit than a smaller one.

All deposit money is deducted from your purchase price and is fully refundable by the terms of your contract. Your attorney will advise and protect your interests.
Web Reference: http://www.dianeglander.com
0 votes Thank Flag Link Sat Sep 20, 2008
Search Advice
Ask our community a question
Email me when…

Learn more

Copyright © 2014 Trulia, Inc. All rights reserved.   |  
Have a question? Visit our Help Center to find the answer