The larger the escrow deposit, the more serious the buyer tends to be
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Dear Mr. Feichthaler:
With prices so high, my husband and I are going to list our property with a Realtor and downsize. I have read your columns and know I need to have the sales contract reviewed, but my question is how much is a reasonable amount to require as an escrow deposit? Our home should sell for around $430,000.
-- Dolores B.
Dear Dolores:
It has been exciting to watch home prices rise so dramatically over the past year. Especially for those considering downsizing or leaving the area, many owners are finding this a good time to sell.
My advice has always been that, the larger the escrow deposit, the more serious the buyer tends to be. That seriousness usually translates to a much greater likelihood the transaction will reach the point of closing. It is a shame when a seller goes weeks or months thinking they have sold their house, only to have the buyer cancel at last minute. With a meaningful deposit, this is a good sign the buyers will come through.
Typically, for a house of your value, I would recommend a deposit of a minimum of $10,000. I have seen deposits for your value of home range from $50,000, all the way down to $500. You can guess the small deposits are the contracts that are more likely to cancel. Keep in mind, some buyers will want to put a small deposit, or no deposit, down when financing through FHA or VA. I still recommend an adequate deposit, which they could potentially get refunded at closing, if they do obtain 100% financing.
You may also want to require the deposit, or at least part of it, become non-refundable at a certain point. If you take the property off the market for months, you may have expenses you didn't expect. Many of my clients require a portion of the deposit to be non-refundable after the inspection period ends. Clauses like this also tend to lead to successful closings as well.
I wish you the best of luck in getting a great price. Based on current high demand and low inventory, you should do quite well.
Eric P. Feichthaler has lived in Cape Coral for over 33 years and graduated from Mariner High School in Cape Coral. After completing law school at Georgetown University in Washington, D.C., he returned to Southwest Florida to practice law and raise a family. He served as mayor of Cape Coral from 2005-2008, and continues his service to the community through the Cape Coral Caring Center, Cape Coral Historical Museum, and Cape Coral Kiwanis. He has been married to his wife, Mary, for over 20 years, and they have four children together. He earned his board certification in Real Estate Law from the Florida Bar. He is AV Preeminent rated by Martindale-Hubbell for professional ethics and legal ability, and is a Supreme Court Certified Circuit Civil Mediator. He can be reached at eric@capecoralattorney.com, or 239-542-4733.
This article is general in nature and not intended as legal advice to anyone. Individuals should seek legal counsel before acting on any matter of legal rights and obligations.