Worried about your deposit? Relax

Question: Marsha, I had been looking for an apartment for six months. Finally, I made an offer which was accepted. Now it feels like time is passing at breakneck speed. We close the escrow in 30 days and all of these terms, conditions and “must do” are thrown at me. On top of everything, I had to put a large “good faith” deposit in escrow. I fear losing my money if things go wrong. My agent told me to relax. Am I worrying unnecessarily?

A: I know what you’re feeling. You have gone from a methodical review of houses to a binding contract with terms and conditions that must be fulfilled in a timely manner. You feel like the 6th grader who missed math week where how to reduce fractions was discussed. Now you have no idea what someone is talking about. On top of that, you have money at risk!

When you initially made your offer, your agent told you that a good faith deposit would be required. The amount of the deposit varies from county to county and according to local customs. In Santa Barbara, 3% of the offer price is the norm. If you choose to offer less than that, you risk having your offer rejected. Or, more likely, you will receive a counter offer asking you to increase your deposit to 3%. The deposit is not your deposit; however, it will be factored into your down payment.

There is a reason for the 3 percent amount. I won’t go into detail here, but this is a possibility of “liquidated damages” in the contract. If both buyer and seller initial the possibility of damages, it is agreed that the seller will not sue the buyer for more than 3% of the contract if this real estate transaction goes really badly. It sounds scary, but trades rarely fail so badly.

Sign up for Indy Today to receive fresh news from Independent.com, delivered to your inbox every morning.

What you really want to know is: under what circumstances can I get my deposit back and when can the seller claim my money back?

With most contracts, there are unforeseen events, which must be approved by the buyer for the sale to be concluded. You buy a condo. The three important contingencies that must be respected are: the physical inspection and the condition of the condo; the financing of the sale must arrive; and finally, you must approve the RACs, conditions, covenants and bylaws of the condominium association. If any of these contingencies are not cleared by you, the sale will be canceled and your good faith money returned.

When can the seller keep your deposit? Once you have cleared all contingencies, the seller is confident that the sale will go through. If you terminate the contract now, the seller will be entitled to demand and keep the deposit. Surprisingly, even when entitled to it, most sellers still release the deposit. They just want to quickly put the house back on the market and sell it.

As your real estate agent said, relax! You are on the right track to buying your condo, and your deposit money is safe.

Marsha Gray, DRE # 012102130, NMLS # 1982164, has been a real estate broker in Santa Barbara for over 20 years. She works at Allyn & Associates, real estate and loan services. To read more Q&A articles, visit MarshaGraySBhomes.com. She will research and answer all questions submitted. Contact Marsha at (805) 252-7093 or MarshaGraySB@gmail.com.

Support it Independent from Santa Barbara by a long-term contribution or a one-off contribution.

Previous Brian Johnson: 1031 Tax Deferred Exchange Safe For Now | Business
Next The $ 300 Million Flip-Flop: How the Zillow Real Estate Site Sideways Bustle Got Wrong | Immovable