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Is Earnest Money Important?

by The Schuman Team

 

earnest money check

When writing an offer, there are many factors that are considered to be important, such as price and closing dates. One of the often overlooked items that appear in the purchase agreement is earnest money, the topic of today's post.

DO YOU REALLY NEED IT?

First off, earnest money, or good faith money is not required in Ohio. However, it is a way to convey your commitment to purchasing a home and is expected by local sellers. Sometimes it can even make a difference in whether or not a seller accepts an offer.

Buyers always ask us how much they should offer. There is no set rule on this although we do recommend at least 1-2% of the purchase price. So, for example, earnest money on a $300,000 offer would be $3000-$6000. Again, there's no set rule on this and you could certainly go above or below this threshold if you'd like, it's just a gauge we use.

Some buyers, especially first timers, are always a little reluctant to give any money up front because they often don't understand how it works. There is actually very little risk in offering earnest money. The money is held by a third party, not given directly to the sellers. If for some reason the deal doesn't work out for a legitimate reason, the money gets returned to the buyers.

IT CAN MAKE A DIFFERENCE

Earnest money is a way to show your commitment and can actually be a deciding factor. I have been on the listing side of a transaction where we received two offers that were similar in price. The sellers felt that the buyer who offered a significant amount of earnest money was more serious and chose to work with them.  This may be a rare case, but is something not to be taken lightly.

When all is said and done, price is likely the most important thing to a seller. However, showing your strength as a buyer can make a difference so it's worthy to discuss earnest money with your agent

Are We Headed To A Seller's Market?

by The Schuman Team

 

Are The Tides Changing To A Seller's Market?

The local real estate market seems to be picking up. Inventories are low, the weather has been unseasonably warm, and buyers are not just looking, but actually writing offers.  It may be too early to declare a seller's market, but it seems to be at least more balanced.  The busy market is causing buyers and agents alike to start changing the way in which they approach offers. 

SLOW MARKET = NO URGENCY

Over the past few years when things were slower, the buying and selling process often took a long time. Buyers were afraid of overpaying and sellers were unwilling to accept what the market was willing to bear for their home. Basically, there was gridlock and an overall lack of urgency on all parties to get anything done.

Buyers, until recently, had been in control. The general attitude of most was that a seller would be lucky to get an offer from them. Plus, if things didn't work out, they would just buy another home. Their level of commitment was suspect as well with some buyers preferring to just make a verbal offer instead of putting it in writing.

Negotiations also dragged out over days and sometimes even weeks.   Now,  a shift in the market has taken place and those not ready to adapt will end up losing out on the home of their dreams.

TAKE QUICK ACTION OR LOSE OUT

Today's increased activity is causing things to happen at a much faster pace than many are used to, including some agents. Anyone approaching the process in a lackadaisical manner will end up learning the hard way, when the home they want is taken by someone else.

We are not saying that buyers should make hasty decisions. We are simply recommending  that once you know what you want to do, do it quickly. Make an offer, work out the details, and get all parties to sign and date the documents as soon as possibly. This is even more critical if there is heated competition for a particular home.

NO SIGNATURE, NO DEAL

A last bit of advice. Understand that until all required paperwork is signed, dated, and/or initialed by all parties, there is no deal. 

In the end, you need to be prepared for today's changing market and having a great agent by your side will certainly make a difference.  Otherwise, the American dream could turn into a nightmare for you.

 

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Contact Information

The Schuman Team
HOWARD HANNA REAL ESTATE SERVICES
3550 Lander Road
Pepper Pike OH 44122
Dan: 216-346-3235
Amy: 216-403-9189
Fax: 216-456-2333