The point of leaving a deposit with an offer to purchase a property is to let the sellers know you are serious or “earnest” about your offer. That is why it is referred to as “earnest money.” If a potential buyer did not leave any money with an offer they would not have any risk involved. Money offered with the offer to purchase tells the sellers the buyer is serious about the offer. There is risk involved for both parties. In the Knoxville area it is common for buyers to leave a deposit of between one and five percent of the purchase price. Professional real estate agent Troy Stavros, of Gables & Gates, REALTORS states under certain conditions a larger deposit is wise. For example, if the purchase offer is weak, or if there are several offers competing against each other, a larger deposit may sway the sellers towards the buyer’s offer. However, normally, the lower deposit is sufficient.
There are some risks when giving a deposit with a purchase offer. However, states have minimized this risk with regulations and through the use of escrow companies. Although the deposit “belongs” to the seller, it is held by either the real estate company or an escrow company until closing. If the deal falls through it is easier to get the deposit back to the correct party. In some cases that would be the buyer and in other cases it would be the seller. One complication with using an escrow company is the parties involved need to be in agreement before the funds are released. In order to protect your interest it is best to use a professional real estate agent or broker in the Knoxville area. If you would like more information about agents in the Knoxville area go to www.RealEstateFish.com or call Troy Stavros at 865-599-9444 or email at Troy@RealEstateFish.com.