Cleveland Real Estate - What is a Good Faith Deposit?

If you are renting an Cleveland apartment, you know that you must make a deposit in order to cover property owners cost in case of property damage. Earnest money, commonly known as a good faith deposit, operates in much the same way, except this money is representative of the buyers willingness to buy in places a certain amount of money down on the property.

This ensures that the offer to purchase is not simply a waste of the Cleveland home sellers time. After accepting a contract, the seller will deposit the earnest check and stop showing the property.

Says the buyer may not yet have a Cleveland mortgage, it is necessary to have this amount in order to cover the time that will be wasted if a loan deal falls through. The larger the deposit, the more reassured the seller will be that the buyer is not joking around about wanting the Cleveland property.

So what percent should a good faith deposit be?

This will mostly depend on an individual circumstance, but a good rule of thumb is 5% to 10% of the offer price of the home, paid in cash. This amount is usually large enough to protect a seller from the buyer simply walking away from the Cleveland loan agreement.

While it is a good idea to put down 10%, 5% will usually be sufficient if you do not have the money. Attaching a $500 per $1000 check to the contract is a good idea and an act of good faith. The rest of the earnest money can be deposited after the contract has been signed by the mutual parties.

This money will then go into an escrow account which will be held by the selling agent, in this money is usually simply applied to the down payment on the piece of Cleveland real estate.

So what if a home contract falls through?

In this instance, the earnest money will simply be refunded to the buyer, if the problem is with the seller themselves. If, on the other hand the buyer simply walks away from the agreement, they will lose the deposit that they made on the Cleveland property as a result of wasting the seller's time.

Sellers are legally required to pay back this money if the arrangement falls through, and they must sign a release of escrow before the money is returned. Cleveland lawyers may have to resolve the issue and it may be taken to local courts, although this is quite rare, as the agreement is pretty standard.

Brokers also have it in their best interests to reach an agreement or they could lose their licenses if they turn over the funds to either party before a conclusive agreement is reached.

Keep in mind that a Cleveland real estate broker will usually walk you through this process and tell you how much money you should put down the property. Enlisting the services of a professional is helpful in order to help you navigate the minefield that purchasing a Cleveland home involves.