Mastermind for May 16th. Show Me The Money!
How important is the deposit on a real estate transaction? Well, lets first look at the seven key elements of a legal contract; the first two are offer and acceptance. Third, the parties have to have the capacity to enter into a contract ( ie; they are of legal age). Fourth, the contract has to be for something legal. Fifth, both parties have to consent to the contract. Sixth, the contract has to be written on a form that the law requires and finally there has to be some consideration. In real estate the consideration is simple. I will buy your house for this amount of money.
Part of that consideration comes in the form of the deposit that accompanies the offer. In simple terms, it is a show of seriousness on the buyer’s part and that is why it is important to show up at the offer table with a negotiable cheque ( a cheque that I can take to the bank and exchange for cash if needed). In a multiple offer presentation having a certified cheque or money order will give you a serious advantage. Perhaps this story will demonstrate just how important.
This week an agent in our office was reviewing several offers on a home she had listed. After the first round, the five original offers came down to two good unconditional offers. The first, for $550k had a $5k deposit to be delivered the next day, and a further $15k deposit by the end of the week. The second offer was for $542k but was accompanied by a $50k bank draft. In the end, the sellers accepted the lower offer because there was a level of safety in a strong deposit. While a buyer might easily wake up the next morning with a serious case of buyer’s remorse and give up $5k, a $50k deposit is a lot harder to walk away from. This is not the first time I have heard a similar story so I hope that other agents reading this will give me lots of examples. I would like to know what the breaking point is. That is, how much is a seller ready to give up in order to have some piece of mind that the deal is done.
While we are on the subject, many real estate companies do not require certified cheques, but just remember if the brokerage puts the uncertified cheque in the bank and the deal goes south, don’t expect to get the deposit back right away. You will have to wait at least a week before it clears. Just one more reason why agents need to explain to buyers the importance of a good strong negotiable deposit.