The Deposit

Its not a great time to buy a house unless you have secured a significant deposit towards the expenses & down payment of the house you are about to buy.
Firs of all, generally the sales commission to an agent is about 4.5% to 6%. In my experience, I have learned that agents want buyer to give the maximum deposit towards the purchase to indicate that you are indeed a serious buyer.

The very first time you give a deposit to an an agent or agency will be when you want to make an offer. In general, this is the very first & smallest part of the deposit you will give. I have noticed most agents will ask for a $500 deposit to go along with the "Offer to Purchase". If no deposit is provided, there's no way to bind your offer with the acceptance.

CAUTION: Be sure that any deposit you provide is made out to the real estate agency and NOT the agent directly. Hence a check to "XXXXX Real estate" is what you want...not "John Doe".

The reason is if should anything fall through, you want to make sure that any possibility of recovering your money is made easier.

The agency is licensed and BONDED. The agent is an independent contractor.


With luck on your side, assuming you have managed to come into agreement on the PURCHASE PRICE, the next question is...where's the Purchase & Sale agreement?

I will cover Purchase & Sale's Agreements later.

I am almost certain that the agent will recommend to you the amount they would like you to provide to them as a deposit when you sign the Purchase & Sale agreement.

As I stated above, an agent will try to convince you to deposit with them the balance of the sales commission with them. (You are basically providing a 4. to 6% deposit on the purchase price.) The agent is trying to ensure that they don't have to worry about collecting their commission when the transaction closes.

If you are loaded, they go ahead and give the big deposit, but why such a big deposit when you don't have to?

ING is paying 2.4% per year on their savings account. If you had a purchase price of $200,000 and had to give a 5% deposit, that's $10,000.00.
Let assume you won't close for 30 days, that means you could earn $20.00 for that month. (It's not much, but imagine if there's a delay and you can't close for say 60 or 90 days?)
I can with 90 percent certainty ensure to you that the agent or Realtor will not provide you with interest. Some do, but they are the exception, not the rule.

My advice: Give a deposit that ensure you are a serious buyer, but only as much as you feel should convince the seller you are serious.

The other reason I highly recommend that you not provide the agent the full commission as a deposit is the following: Should you require their assistance or help in any manner....

If you have provided them the full deposit...they want the closing to happen to as soon as possible...regardless if any repairs request you have made are completed or not..and if they haven't they are your problem.

On the other hand...they don't feel like "they have earned" their commission until the closing happens because they will get paid when you close. The money has not already been sitting in the Real Estate Agent's bank account.

ONE NOTE REGARDING INTEREST: While real estate agents may or may not pay interest...Attorney's Bank accounts DO NOT PAY INTEREST...but the law firm DOES NOT GET ANY INTEREST EITHER...rather the interest that the account get paid to the STATE IOLTA COMMITTEE who then distributes and fund local programs that provide low cost legal assistance to the communities.

I hope that my advice helps some you you as you learn about what it takes to purchase a home.