The Details on Deposits
Real estate transactions require a certain level of trust between the buyer and seller.
Not only will the buyer be acquiring the seller’s home — an act that can carry a great deal of legal and emotional baggage — the buyer also has the power to walk away from the deal altogether, leaving the seller in the lurch.
To help reinforce what can be a volatile relationship, buyers usually offer up a deposit — just a little something to ease the mind of a stressed-out seller and to cement their interest in the property.
Though placing a deposit has become standard in the real estate world, the practice does have a number of variations: Do you put five percent of the purchase price down? Is the deposit counted towards the down payment? Will a $1,000 suffice? If the deal falls through, who keeps the money?
To these inquiries, there can be no simple solution.
“There’re as many ways to do it as you can think of,” admitted Steven Louchheim of the Tallahassee Board of Realtors, “but I’d say generally it’s part of the purchase price.”
According to Susan Thompson, lawyer and managing partner of Smith, Thompson, Shaw, Minacci & Colón, in Northwest Florida deposits are generally kept low in favor of a “buyers market.”
“There is no standard, but for whatever reason in our area people put down a thousand or two thousand dollars,” stated Thompson, whose firm handles many similar escrow transactions. “In South Florida, you’re going to see about 10 percent (of the purchase price.)”
According to Louchheim and Thompson, the ultimate recipient of the deposit in case the transaction goes sour is generally specified in preliminary contracts. If the parties cannot agree on where the deposit should go, the funds are entered in an interpleader and a judge will make the final decision. The cost associated with the legal fees, however, makes this option undesirable.
“A lot of people will walk away from a thousand dollars,” said Thompson.