Earnest Money Deposits and Your Plano Home Purchase

Home Buyers always ask how much earnest money deposit they should offer. Generally, there is no set amount. In most States, contracts must contain a consideration to be valid, but that amount can be as little as one dollar. Laws in your state may be different. Keep in mind that the amount of your earnest money deposit depends primarily on your local marketplace and customs.

What is an Earnest Money Deposit?

An earnest money deposit is a good faith deposit. When buyers execute a purchase contract the contract specifies how much money the buyer is initially putting up as earnest money to secure the contract. It will also show how much down payment the buyers are agreeing to make. The balance is usually financed as a mortgage. An earnest money deposit says to the seller that you are serious about buying their house. An earnest money deposit for Plano foreclosures also shows the bank that you are a serious purchaser.

How Much Earnest Money is Enough?

Because there is no set amount, it varies from market to market and across the country. Where I work, selling Plano homes and DFW Homes in Texas, generally this amount is between 1% and 5% of the purchase price. Buyers here do not often put down more than 5% since the sales contract contains a liquidated damages clause that awards that earnest money to the sellers should they default and not close on transition. If we were in a seller's market, with many buyers fighting over limited amount of home, it makes sense for the buyer to put down a much larger earnest money deposit to entice the seller to accept their offer. In a buyer’s market, a larger earnest money deposit might entice a seller to accept a much lower purchase price.

Who Do You Give Your Earnest Money Deposit To?

In every jurisdiction that I am aware of, the earnest money deposit should either go to the Title Company or legal firm handling the closing or to the listing brokers escrow account. Review the advice below:

· Never give an earnest money deposit to the seller.

· Verify that the third party will deposit the funds into a separately maintained trust account.

· Obtain a receipt.

· It is not advisable to authorize a release of your earnest money until your transaction closes.

Is Your Earnest Money Deposit Refundable It You Do Not Close?

Study your sales contract and addenda to see what it says about what happens to your earnest money deposit if the transaction doesn’t close. The answer will depend on why the transaction didn’t close. Were you not able to get your financing approved or maybe you couldn’t get clear title to the property. Did you or the seller simply change their mind about closing? Upon cancellation, the sellers and buyers are asked to sign mutual release agreement. If an agreement cannot be reached, the party holding the earnest money deposit will continue to hold it until an agreement is reached. If no agreement has been reached after certain period of time, title companies will send the parties a certified letter asking for mutual instructions. The letter will state that if no one responds within a certain time period, then title agent will return the money to the buyer. If the seller contests the action then the parties will have to go to arbitration or court to get the issue resolved.

Do You Need a Deed of Trust With your Plano Real Estate Purchase?

The amount of paperwork a Plano real estate buyer signs at closing is overwhelming to say the very least. Almost all of these documents will be generated by the buyer's mortgage company. Without ever reading them and just signing off on them, it generally takes buyers an hour to complete them. Every blue moon, I attend a closing with buyers who actually take time to read through the closing documents.

Unless you are paying cash or you are in a mortgage state you will be required to sign a Deed of Trust. It doesn’t matter if you are buying a Highland Park Home or Dallas Foreclosure properties the Deed of Trust works exactly the same.

What is a Deed of Trust?

A Deed of Trust is the security instrument for your loan. It is the document that is recorded in the public records and secures a lien for the lender against your property.

A deed of trust contains three parties:

· Trustee, which is an entity that holds "bare or legal" title

· Trustor, which is you, the borrower

· Beneficiary, which is the lender

The deed of trust is a security instrument that identifies the following information:

· Original loan amount

· Legal description of the property being used as security for the mortgage

· The parties to the transaction

· Inception and maturity date of the loan

· Provisions of the mortgage and requirements

· Legal procedures, including acceleration and alienation clauses

· Riders, such as clauses for prepayment penalties

Who or What is a Trustee?

Deeds of trust contain a trustee who is an independent third party that does not represent the borrower, the lender, or the owner.

· The trustee can be a person or an entity that holds the "Power of Sale" in the event of a loan default.

· The trustee also reconveys the property once the deed of trust is paid in full.

· In the event of a default, the trustee files a Notice of Default; however, in most instances, the trustee will substitute another trustee to handle the foreclosure process under a Substitute Trustee.

· After the required period of time in the public records, and the required period of time in the publication period in the newspaper, the trustee then has the power to sell the property without a court procedure or lawsuit.

· In many jurisdictions following recordation of the Notice of Default, the borrower can redeem the property by making up the back payments and paying the trustee's fees.

· Once the trustee sells the property at a Trustee's sale, it is final.

What is a Promissory Note?

Whereas the deed of trust is security of the loan, secured by the property, the promissory note is the evidence of the debt and the promise to pay.

· The promissory note is a promise to pay, signed by the borrower.

· It contains the terms of the loan such as the interest rate and payment terms.

· The promissory note is generally not recorded in the public records.

· When the loan is paid, the promissory note is marked "paid in full" and returned to the borrower.

Before Signing a Promissory Note and Deed of Trust

Read both of these documents thoroughly, including the small printed sections. You should consider asking the closer to send you a copy of the preliminary deed of trust and promissory note beforehand. Because closers are human and make mistakes, here are the important items to review:

· Address of property

· Spelling of trustors' names

· Principal balance of the loan

· Interest rate

· Payment amount

· Prepayment penalties, if applicable

DFW Real Estate Showing Tips

When showing your DFW home for sale, you want to do your best to engage the buyer emotionally because their decision to buy is based more on emotions, and less on logic. Give the buyer the emotions to say yes by staging and accentuating your home's positive attributes, and minimizing attention to the negative attributes. This is paramount to selling any DFW real estate and Plano real estate successfully.

Gracious Welcome

Although buyers are guests in your home, you want them to imagine themselves owning and living in the home. You don't want to make the buyer feel like an outsider.

· Don't pressure or hurry the buyer. Tell them to take all the time they want.

· Don't expect the buyers to remove their shoes, unless you are selling to a buyer for whom religious or cultural reasons dictate it.

· It is best to leave the house. The buyer won't feel comfortable about talking about the house in front of you.

· Leave a bowl of mints or other treats near the front door with a small note thanking the buyer for coming to see your home.

Check the Temperature

· Now is not the time to worry about your utility bill. If it's cold enough to wear a sweater turn on the heat.

· If it's hot outside, turn on the AC. It's better to heat or cool the house a degree or two warmer or colder than usual and then set the temperature at normal. This prevents the heat or A/C from coming on when the buyer is present, because some HVAC systems are loud.

· You want the temperature inside to be comfortable and to give the buyer more of a reason to stay longer, especially on hot or cold days!

· This may not be possible with Dallas foreclosures because many times the utilities are not on at the property.

Create a Mood

· Light a fire in the fireplace even if it is summer time.

· Romanticize it by placing two champagne glasses on a nearby table.

· Turn on soft music like jazz or classical.

· If you have water fountains, turn them on.

· Turn on all lighting and ceiling fans.

Play Up the Visual

· If you have seasonal photographs showcasing flower gardens, leaves bursting in color or a snow-covered lawn twinkling from street lights, then display them.

· Take down all the photos of your family. If your family members are pasted all over the walls it’s hard for them to imagine it being their own home.

· Open all the window coverings to let in light.

· Keep blinds partially closed that otherwise show undesirable outdoor scenery such as a dilapidated fence or a nearby structure that obstructs views.

Play Down the Scent

· Many people are allergic to certain scents and deodorizers, so don't spray the air or plug-in air fresheners.

· Don't burn candles or spray perfume in the bedroom for the same reason.

· If you're going to bake cookies or brownies or simmer spices such as cinnamon in water on the stove, put out munchies so buyers aren't disappointed. More than one buyer has said, "Oh, shucks, I thought there were cookies here".

Brighten up the House

· Turn on every light in the house, including appliance lights and closet lights.

· Brighten dark rooms with few windows by placing spot lights on the floor behind furniture.

· Turn on all ceiling fans and even the fireplace.

Provide Thoughtful Notes

Attach printed notes to items and in rooms that provide further information the buyer might miss or might not know. This will go a long way with the buyers.

· If you have an expensive chandelier in your dining room, put a card on it that discloses its age and other important details.

· If you have removed the washer and dryer from the laundry room, attach a card to the wall describing the room.

· If a room is empty place a note giving the buyers an idea what this area can be used for.

Top It Off With Food

The best way to entice buyers to linger in your home and notice more details about your home is to offer them food and drink. You don't need to cater a lunch, but finger sandwiches, cookies, soft drinks, water, coffee, and desserts are all a good idea.

Encourage Buyer Feedback

· Near the food and drinks, leave pens and a stack of questionnaire cards for the buyers.

· Buyers will feel obligated to respond to your request after being given food and drink.

· The showing feedback you receive will be invaluable to your selling goals.

· Allow buyer anonymity by not requesting their name or contact information.