When I put an offer on a home, how much cash do I have to put on the table right away?

  • by fred - Mon, 04/20/2015 - 21:36

Interesting and really good question.  A lot depends upon the type of loan program you are using, or whether you are paying all cash at closing.  But that is all due at closing.  What happens when an offer is first accepted is different.  Often closing is 30 to 45 days after mutual acceptance. 

Most all offers have what’s called “Earnest” money.  This is a deposit made by the Buyer that indicates good faith to the Seller that they are “earnest” in going forward with the purchase, subject to certain conditions, such as clear title, inspection, valid appraisal, to name a few.

Most contracts require these monies to be deposited within a few days of Mutual Acceptance of the Purchase and Sale agreement.  Escrow, or the Real Estate office representing the Buyer, holds these monies in trust.   Though there is no law or rule requiring a certain amount, somewhere between a half of percent to 1.5% of the purchase price is typically tendered.  As long as the Buyer goes forward with the transaction, those monies are credited towards the purchase price.  The Buyer may back out for a contractual reason and retain the Earnest Money deposit.  An example could be unable to get financing, or disapproval of inspection, are some examples of this.  If the Bueyr backs out for a non contractual reason, the earnest money is forfeit to the Seller.

The next out pocket monies usually is the General Inspection fee.  Usually, done within a week of mutual acceptance. Once spent, even if the Buyer uses the inspection to back out, the inspection fee is gone.  Typical inspection fees can range from $300. to $500. depending upon property size, etc.

Sometimes the lender will need the appraisal fee up front, so that is another $400. to $500. as well.

The rest of the dollars are due a few days before closing.  Keep in mind a Seller may want a Proof of Funds document (bank statement), and often lenders will want to see your down payment monies in your accounts sooner than later, or documentation of where those monies will come from.

Then there are short sales where this entire process is delayed until lien holder approval, which means it could be months and months before any monies are tendered. Or, If you purchase a home in auction that is being foreclosed on, you need to have 100% of the money, in the form of cashiers checks due immediately when you win the bid!

Ultimately you should have a qualified Buyers Agent representing you when you purchase a home.  One of their jobs is to minimize your expenses and risks.  Call or email us with any questions.