Home Buying in Dover>Question Details

William, Home Buyer in Rockaway, NJ

question about additional deposit section in contract of sale?

Asked by William, Rockaway, NJ Mon Dec 1, 2008

I am a first home buyer. I don't know much the procedure of buying a house. in the contract of sale, it states that:
Additional deposit paid by Buyer, 10 days of conclusion of Attorney Review. All deposit monies paid by the Buyer shale be hel in escrow in the NON-INTEREST BEARING TRUST ACCOUNT of Buyer/Seller's Attorney, Escrowee, until closing of title, ect

in the contract, the agent (act as dual agent) put 50% of my total down payment in the contract, Is it a normal procedure in the contract of sale?

I don't want to put additional deposit money, I just want to put all down payment money at the end of closing date. Is it possible?

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BEST ANSWER
William: A dual agent should follow your directions. That's what agents do. Now, your story doesn't quite tell us what we need to know. Did you sign the contract? Did the seller accept it? If so, you are under contract with the terms that were written.

In NJ, there is a 3-day attorney review. During that time, an attorney that you hire and pay for can give you advice as to the legal implications of the contract. He can, if it seems desirable, reject the contract. Usually, if there is just some language and /or details that need changing, he can also state that it would be acceptable if the changes were made. The seller has the same right of review and the attorneys can negotiate the changes back and forth until both parties are satisfied.

If you did sign but did not consult an attorney for 3 days, you have a contract that you have agreed to by default and you should do what the contract says you promised to do. If you don't, the seller can void the contract. If he doesn't, you may go to closing without having done what you should. The total down payment will have to be made than and if the escrow is short of what it should have in it, you will have to make it up at the closing table.

Escrow. The word means putting funds in an account that holds them so no one can get them until one of three things happen. They are: that they come out at closing to complete the deal, they get returned to you or split up between the parties by agreement or if the parties do not complete and do not agree, by order of a court. Getting the court to decide who gets what costs money.

How much should the deposit be that will be held in escrow? There is no magic formula. The seller wants to be sure that it is not so small that you walk away and leave the deposit. Technically, he can't get the money without a court order, even if you do walk, and it will cost him to get it.

The decision about how much to put up as a deposit is really up to you. The seller, if dissatisfied, can always ask for more.

Non-interest bearing accounts are very common. Usually, the closing is not too far away in timing. Keeping the account in an interest bearing account can get complicated if the organization has more than one deposit in the account or more than one account. These days, with low rates of interest in saving accounts, most escrow holders just set up non-interest-bearing accounts for convenience sake.

Lots of luck with your deal.
0 votes Thank Flag Link Mon Dec 1, 2008
William: A standard New Jersey Realtor's (NJAR) contract should say so on the contract. Realtors cannot generate a contract, that is legal work and only a lawyer is licensed to do that kind of stuff. What the "standard" NJAR contract has is a "fill in the blanks" approach and the blanks include both an initial deposit line and down a line or so an "additional deposit" line.

You fill the blanks in with anything you want, including “0”! I'm not going to tell you that the seller will accept what you fill in but you can change it if they object. They can ask more than you want to give and you can negotiate the deal back and forth.

Now, a contract is a beautiful thing. Only attorneys can give you LEGAL advice about it. All any realtor can do is fill in the blanks. Now you may get some coaching from the agent but he's truly not supposed to do that.

Since you are so anxious and uninformed about what you are doing, in this case (and many others as well, believe me,) I strongly recommend a getting a good attorney, one who has experience in the real estate business to counsel you. That's why one of the names we call attorneys is "counselor."

You’re spending a great deal of money; perhaps more than you've ever spent before in your life. You will insure the house for casualty loss; why not insure the deal with legal advice that will probably cost you less than the house insurance?
0 votes Thank Flag Link Tue Dec 9, 2008
Just in case anyone need to fill out a NJAR Contract form, I found a blank form in this link http://pdf.ac/6LCxh. This site PDFfiller also has several related forms that you might find useful.
Flag Sun Mar 29, 2015
Thanks for all replying. Anyway, the money that I put for additional deposit into Escrow Trusting Account is a standard realtor's contract of sales. Isn't it?

How much is a normal amount deposit into that account?

Thanks
Will
0 votes Thank Flag Link Tue Dec 9, 2008
Hi William: Hate to chime in again but there were two little things that others have said with which I have to respectfully disagree. The first is "trusting" the escrow account. Escrow is held as a fiduciary responsibility. An attorney in this state, I have been told by attorneys and WITNESSED myself, can lose their license for violations of their escrow duties faster than for criminal complaints against them. While I have to admit that once, in a failed deal, the REAL ESTATE firm for the buyer released the funds back without the sellers agreement, which is illegal, as I understand it, nevertheless, they were also liable for a suit and perhaps penalties from the state commission. (In this case, the seller did not wish to pursue the matter and sold to another buyer) In our office, we try everything in our power NOT to hold escrow. Our policy is that the closing agent should hold the escrow. It is still in a legally controlled account and it is available without delay should the closing date change, which happens fairly frequently in this state.

The second thing that I disagree with is the use of the term "Normal and customary" in regard to deposits. Again, in this corner of the state, I have never heard any such term bandied about. As I explained, the seller is looking for a sum large enough to keep the buyer from just walking away from a deal he no longer wants, after the seller has taken his property off the market. I have often seen first time homebuyers, having very little cash and using an FHA mortgage where they were financing closing in the mortgage, have very little in deposit. What they had was needed for moving expenses.

Therefore, there are amounts that can be called "usual," adequate, or even, "what you would expect" but I would not categorize them in any special way or indicate that they had to be in a specific percentage range.
0 votes Thank Flag Link Fri Dec 5, 2008
The Contract of Sale states the terms by which you enter the transaction. As a Buyer's Agent I would explain that normal and customary in the State of NJ is $1000-5000 to enter the offer on a property. On the next line is the 1st deposit which consists of the original deposit ($1000-2000) plus normal and customary of 10-20% of sales price. This money is due usually 10 days after Attorney Review concludes. The final monies through mortgage or additional cash is due at closing. Hope this helps. I am sure if you explain to your agent or attorney your intent you will be able to straighte it out.
0 votes Thank Flag Link Thu Dec 4, 2008
William: Thanks for the clarification. A verbal contract is not worth the paper it should be written upon. Failure to sign it means there is no contract at all. You can rescind it immediately, if you like. When YOU receive a signed copy, the three-day attorney review starts. Not when they sign it, not when they mail it, not when they give it to their agent, not when the give it to your agent but when you receive it. There is a clause in the standard NJ Realtor's (NJAR) contract called "counting the time." It explains how the three-day attorney review is calculated. Even if you did not use the standard NJAR contract and got something from an out of state firm or their attorney that does not mention the three day attorney review, I believe that the NJ law prevails and you cannot be denied the attorney review.

Realtors are forbidden to practice law (unless they are licensed attorneys) and I would NOT depend on anything a Realtor or other real estate agent tells me. The first clue would be that they would be breaking the law by telling you anything. Therefore, the clever answers is, once you get the contract signed and back in your hands, hire and pay for an attorney. There is just too much money involved and, as I have said, the seller has an attorney on retainer. Sometimes that attorney is not familiar with NJ laws and will advise his client to do things contrary to our laws, which differ in some respects from those of other states. Therefore, you should not accept anything that the seller or his attorney tells you with out consulting a NJ attorney. All NJ attorneys are not created equal and the lawyer who could get a criminal out on bail might not be experienced in dealing with real estate law or the misconceptions of out of state lawyers in that regard. Select your counsel carefully.

The short answer on the return of deposit is yes you can. The longer reality is that, once in escrow, it can be released only upon agreement from both sides, which should not be withheld. The further problem is that if the inspection turns up things you don't like, you can get involved in a dispute about the seller's proposed fixes and their adequacy and the quality of the work, should they agree to perform any repairs. While most banks do not wish to be bothered, each manager usually has some discretion and might offer and even insist that the repairs that they will make will keep the contract in full force.

Best wishes. I hope you get the home of your dreams.
0 votes Thank Flag Link Tue Dec 2, 2008
If this is a standard NJ Association of Realtors Real Estate Contract, section 20, subsection d, addresses your last comment regarding problems found in the home inspection. That's the Inspection Contingency Clause section.

I would also suggest that any deposit monies be kept in YOUR attorney's Trust Account and not in the Trust Account of the dual agent's broker or the sellers attorney.

Laura Giannotta
Keller Williams Atlantic Shore
609-384-6121
0 votes Thank Flag Link Tue Dec 2, 2008
here is my situation: i did sign the contract, however the seller accepts the offer verbally because they living in different state. Also, i haven't hired any real estate attorney yet because I am still waiting for the contract of sales signs by the seller then send back to the agent.

Will I able to get full amount of deposit back if there are major work required for the house during inspection stage?
0 votes Thank Flag Link Mon Dec 1, 2008
Wiliam,

While the Q & A here can be useful I highly advise your hire a real estate attorney to reiview your contract. This is the best way you know that your interests are being looked after. Contracts can be tricky. What you sign and agree upon can later be use against you. You say you are a 1st-time homebuyer. Real estate agents can't interpret contracts. That is not our expertise. Don't leave one of the most important financial decisions you will ever make to chance. Get a real estate attorney to assist you in understanding your agreement of sale.
0 votes Thank Flag Link Mon Dec 1, 2008
Talk to your agent. This is an item for negotiation, and the seller wants to see the money safely in escrow as soon as possible. The funds are safe, if that's what you're worried about. It's your money until closing. And, if you have the funds available, it's a painless way to buy some positive feelings from the seller to you. (If you put the bare minimum in escrow, it makes the seller worry that you might not be serious or may not have the full downpayment at closing time.)

Oh, by the way, 40 years ago, when you needed to have a 20% downpayment to buy a home, putting 10% in escrow at contract and the rest at closing, was what you had to do.

Good luck with your purchase. And don't be afraid to ask questions like this of your agent. Even if he or she is a disclosed dual agent, he or she will be happy to discuss the details of the contract-to-closing process. A dual agent has to keep your confidential information confidential.

Joan Prout, MBA
Broker Associate
RE/MAX Villa REALTORS
306 Grove Street
Jersey City, NJ 07302
201-946-2700 x310
800-671-0596 x1 (direct)
Joan@JoanProut.com
Web Reference: http://www.JoanProut.com
0 votes Thank Flag Link Mon Dec 1, 2008
Usually to take a home off the market show serious intent of the buyer standard is approx. 1% of sale price can be split up during option period then after option period. Not out of the norm. Escrow is only approx. 30 days prior to close escrow would apply towards your closing costs. On the belief the contract is authored this way for the buyer.
http://www.lynn911.com http://www.homes-for-sale-dallas.com
Web Reference: http://www.lynn911.com
0 votes Thank Flag Link Mon Dec 1, 2008
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