When purchasing a home, one critical step in the home-buying process is providing a deposit. A deposit is an important factor in helping your offer be accepted and in purchasing a home. However, as many people prepare for this real estate transaction, they often don’t think about this payment or it is overlooked.
If you plan to purchase a new home in Markham, here are four things you should know about your deposit.
1. It is Different Than a Down Payment
While your deposit is included in the total sum of your down payment, it is not the same as your down payment. A deposit is essentially money you are providing that is showing the seller that you want to purchase the home. It is provided immediately after the negotiation process when purchasing a home, not during the closing process, which is when a down payment is necessary.
2. It Is Typically 5% of the Home’s Purchase Price
A deposit is also not as large as a down payment on the home. Typically, you will want to pay approximately 5% of the home’s purchase price as a deposit. However, this amount is negotiable. Keep in mind that this money is used to show that you are serious about purchasing the home so you want to make your deposit a priority.
3. You Don’t Pay the Deposit Directly to the Seller
While your deposit shows the sellers that you are a serious buyer, the money doesn’t go directly to the seller. Rather, it goes into a trust account. However, if the deal falls through, the seller may get to keep the earnest money. The buyer typically will only get their money back if both parties agree to sign a mutual release. Otherwise, depending on the reasons for the deal falling through, a judge may need to determine how the funds are to be disbursed.
4. You Can Protect Your Deposit
When purchasing a home, it is possible to protect your deposit to prevent it from going to the seller. One of the best and easiest ways is to read through all documents and contracts provided to you. By understanding and abiding by all the terms in the contracts, it will ensure you will receive your funding back. If you have any questions, it is best to work with your agent and a real estate attorney for clarification and guidance.
Purchasing a home requires many steps and processes that can be confusing and a little overwhelming. If you have any questions or concerns, reach out to Markham real estate agent Martin MacFarlane today. He can work with you every step of the way to help you have a smooth real estate transaction.