The Real Estate Contract
Be prepared to write a deposit check when making a contract offer to purchase real estate. Commonly referred to as a Binder, more commonly known as the initial deposit, this is the check made out to the Selling Real Estate Office or possibly the escrow title company when submitting a contract offer. In simple terms, it is a good faith deposit to express interest in purchasing real estate.
What is the required amount of a binder deposit? There is no law as to a required amount, but local real estate practices may determine what is acceptable. Common sense should prevail in determining the amount of the Binder deposit however. Writing a check for $100.00 shows good faith, but what kind of statement is that making to the owner when the contract offer is presented to them? I myself, usually recommend a good faith deposit of a minimum of 1% of offering price. This is very common and acceptable in the Kingman, AZ Real Estate Market
Would a more substantial initial deposit, say $1,000.00, make a stronger statement? How about $5,000 as an initial deposit, or even more? Wouldn’t a larger initial deposit check make a stronger impression with a seller in making a decision to accept a contract offer or in contract negotiations?
The Binder is generally not deposited by the Real Estate Broker until there is offer and acceptance, a signed contract of sale.
Mortgage Considerations
A contract to purchase real estate will include a mortgage contingency clause which provides a time period for the buyer to apply for a mortgage of a specific amount and obtain mortgage approval in order to complete the purchase of a home. In most instances in todays real estate market, it is required to have a pre-approval prior to writing an offer. This is commonly referred to as the “mortgage contingency clause” in real estate contracts. The time frame for mortgage approval varies from buyer to buyer, and is determined by the type of mortgage being obtained (Conventional, FHA, and VA) and how complete the mortgage pre-approval process was. A buyer’s Real Estate Agent or Mortgage Representative can help in providing more information about the time frame required in processing the formal mortgage application and obtaining the written mortgage loan commitment. At Re/Max Prestige Properties, we have numerous lenders that will work with home buyers, land investors, and commercial property in the Kingman area.
It is recommended that a buyer reviews their Mortgage Pre-Approval when submitting a contract offer, and provide a copy to their Buyer’s Agent. Review is necessary in order to verify that the mortgage amount in the contract offer is the amount in the Mortgage Pre-Approval, or less.
All too often buyers begin their home search in one price range and later find that they need to increase their price range, and increase the mortgage amount, to find a home they like. Obtaining an updated and revised Mortgage Pre-Approval to reflect the mortgage amount in the contract offer is highly recommended.
Closing Date
A closing date is included in the contract offer. This date may be important to the seller in contract negotiations as it relates to their time frame in moving. It is also a consideration for the buyer with regard to their time frame in moving and perhaps with a mortgage interest rate lock in.
Posted at 10:32AM Jul 13, 2009 by Dwayne Patterson in General | Comments[0]