Amandag, Home Seller in Pittsburgh, PA

What percentage of hand money is normal for a $700k house in PA?

Asked by Amandag, Pittsburgh, PA Sat Jul 14, 2012

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Jeffrey Benn…, Agent, Pittsburgh, PA
Sun Jul 15, 2012
In my experience $5,000 would be the *absolute* minimum, but I'd expect the seller to counter asking for more. $10,000 - $25,000 would be more typical. I've seen as high as $50,000.

You want to convey seriousness to the seller (I'd recommend $10k as a reasonable minimum figure for that), but also recognize that you it's *possible* something could happen to cause you to unintentionally default. I've seen buyers have motorcycle accidents, lose their jobs, get sick, have a death in the immediate family, etc. Some just get cold feet and change their minds!

However unlikely, if something like that happens you could also face losing the hand money (in addition to the original calamity). So that's an argument against making it *too* high. Also, it's tied up in escrow for however long the deal takes to close, and isn't earning interest in the meantime. It should be high enough to show you're serious about the house, but not so high it would bankrupt you if you lost it.

I've had people who wanted to put up close to the entire purchase price (for low-priced investment homes, not $700k, of course), in one case just because they didn't want the bother of writing two checks, believe it or not, but I advised against it as an unnecessary risk. Good luck!
0 votes
Sue Musulin, Agent, Upper St Clair, PA
Sun Jul 15, 2012
$5,000 Would probably be on the low side, but may work!
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Blair W. Coh…, Agent, Monroeville, PA
Sat Jul 14, 2012
The amount of the hand money deposit is negotiable between the Buyer and Seller. I have seen transactions with no hand money and I have seen transactions with in excess of 50% hand money.

I always recommend to the Seller that the punishment should fit the crime. In other words if the Buyer should default and the Seller retains the deposit it should be enough to cover any losses the Seller may incur. As a generalization 1% may cover one months expenses for the Seller but closings may take longer then one month. Also a Seller should consider lost marketing time and with real estate sales being seasonal certain times of the year may be more difficult and time consuming to find another Buyer. So I typically would recommend a minimum of $10,000 to $25,000 on a transaction in the $700,000 price range. There are some Sellers who do not care about the amount of the Buyer's deposit while some may require as much as 10%.

Of course for a Buyer lower is typically more desirable but you do want to get the Seller to take your offer seriously. This brings to mind a transaction in the winter of 1977-78. I was a new agent and the home was vacant with the Seller living in Florida. Two offers came in simultaneously. One for $58,000 with $1,000 hand money. The other offer was for $52,000 with $13,000 (equal to 25%) hand money from a seasoned well experienced agent who explained to his Buyer that he was in competition for the home and suggested he give the largest deposit he could. The Buyer decided to give the $13,000 deposit as it was what he needed for down payment and closing costs and he would have to pay it eventually anyway. The Seller was impressed enough to accept the lower offer with the higher deposit because he knew the Buyer meant business. Now this does not always impress Sellers and from my experience most Sellers will take the reasonably higher price but it illustrates how important the deposit can be.

Good luck.
0 votes
Nancy Theys, Agent, Wexford, PA
Sat Jul 14, 2012
It pretty much depends on the area. Some areas are fine with 1%, while others want to see as much as 5%. I would think that I would start out with $15k, and see what the Seller has to say about it.
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Mike Bandoc, Agent, Corona, CA
Sat Jul 14, 2012
I agree with Christa, as I usually go for the 1%. For a 700k however, a 5k might do it as well.
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Christa Ross, Agent, Pittsburgh, PA
Sat Jul 14, 2012
There is no such thing as a "normal" amount of hand money (also called earnest money) in PA. The amount should be large enough that the seller feels that the buyer is unlikely to casually walk away from the deal and small enough that should something happen it won't be a significant hardship for the buyer to lose it. Depending on the seller or the buyer your perspective on that amount would be different. I usually suggest around 1% as a good number to at least start with, the seller can always request more as a term of the contract if they feel it is too little.
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Amandag, Home Seller, Pittsburgh, PA
Sat Jul 14, 2012
hand money is the same as earnest money or the amount of the deposit on a purchase offer
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Alan May, Agent, Evanston, IL
Sat Jul 14, 2012
This is new terminology for me... What is "hand money"?
0 votes
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