Very Large Deposit OK?

Asked by Chengiz, 12047 Sat Jul 25, 2009

We recently made an offer to buy a home for 270K which is being sold in a short sale. Our agent told us that we needed to make a very large deposit - $5000 in earnest money when we present the offer and then $10,000 more when the offer is accepted. We didn't think much of it at first because we don't know a lot about home buying, but now everything I'm reading says this is too large a deposit.

The home is quite new, less than 2 years old, and seems to be in good condition. Should we try to rescind the offer before we get it back (it's going to take a couple of days for the bank to send back the paperwork though they have verbally given approval)?

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Grace Morioka’s answer
Grace Morioka, Agent, San Jose, CA
Sat Jul 25, 2009
Hello Chengiz:

To qualify for a FNMA (Fannie Mae) or FHLMC (Freddie Mac) loan, most banks will require the buyer to put down at least 20 percent of the purchase price. At $270,000, a 20 percent down payment would be $54,000. Since you are only putting down a $15,000 down payment, the home is obviously being purchased through an FHA backed loan, rather than a "conventional" loan with 20 percent down.

While you certainly could have put down much less for your down payment (FHA requires only 3.5% down or $9450 on a $270K purchase), since lenders tend not to like FHA loans for the purchase of REO and short sale properties, I can only assume that to make your offer more attractive to the lender, a larger downpayment was suggested. Putting down more money toward the purchase of the home is one way to "strengthen" the offer on a desirable property. Since this home is less than 2 years old and in fairly good condition, it might be that there were multiple bids on this property and to get the home, you'd need more down payment. To get the full story about why the larger downpayment was needed, you need to talk with your agent.

However, as Lynn pointed out below, if you are uncomfortable with the down payment and have trepidation purchasing the home, then you can always rescind your offer before it is signed or accepted. You might also check with your agent to determine if your offer was accepted or was "bested" by another buyer.

Good luck!

Grace Morioka, SRES, e-Pro
Area Pro Realty
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Dallas Texas, Agent, Dallas, TN
Sat Jul 25, 2009
If the offer has not been accepted you can decline

Deposits can be applied towards your closing costs and etc. however it depends if buyer (you) are qualified purchase any home.

Your agent can forward an email state you have no further interest since bank not signed doc's yet.

If you want the home then keep all as submitted in sales offer.

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