How much money you should put up to make an offer

What is earnest money and how much am I required to put up to make an offer?

Earnest money is an amount that you put down at the time you make the offer to demonstrate that you are serious about buying the house. It should be a substantial amount and countrywide averages from 1% to 5% of the purchase price. However, that amount varies by the area of the country and local customs. In a buyer's market, the earnest money amount is usually much lower than in a seller's market.

If the offer is accepted the earnest money becomes part of the down payment on the property. Who actually holds the earnest money while the deal is going through depends on local custom also. In some areas the money is placed in an account held by the real estate office or an attorney. Your real estate professional will explain the local customs of earnest money to you.

I made an offer on a house. I put down $5,000 of earnest money along with the offer, which was accepted. Now, I want to cancel the deal. What can happen?

The offer you signed is a legally binding contract. As a legal contract, there are financial consequences to either party canceling the contract other than for the listed contingencies. Your written offer will have a clause that lists the penalties for you backing out without an approved reason. In most states you are liable to lose all of your earnest money.

What is a title?

A title is a legal proof of ownership. When the buyer signs a sales contract one of the standard clauses is that the seller will provide the buyer with a title that is free of liens and that the seller has the legal right to convey. This means that the seller must own the real estate and that no other person or entity can have a legal interest in the property; the proof of this is called the title. These legal interests can be other people who legally own the property or, more commonly, liens on the property.

If the seller has not paid certain bills, such as those for home improvements or for taxes, the company the money is owed or even the IRS will file a legal lien on the home. The seller cannot prove a title to the property until that bill is paid off and the lien is removed by a court judgment.

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