A binder deposit is the deposit you make on a contract. What you put down as a binder deposit and how you put it down, depends a lot on
who you making an offer to.
Binder Deposits To Private Sellers
When giving a binder deposit to a private seller, you will always try to give as little as possible. Some private sellers will take as little as $100 as a deposit, but the norm’ is usually from $500 or $1,000 and sometimes more depending on the sales price of the home.
Binder Deposits To Investors
If you are dealing with other investors, they will usually ask for at least $1,000 for a deposit and sometimes more. They know that if you are truly serious and able to close, you will have no problem putting up a sizable deposit.
Who To Make The Deposit Check Out To?
The deposit checks you give should be made out to a 3rd party such as an attorney or title company. If the investor or home seller has a problem with that, then don’t give them the deposit. It’s standard practice that a deposit be held by a real estate agent or a closing escrow company.
If there were to be a problem with the title or the seller were to otherwise be unable to close, you might not be able to get your money back if it’s not held by the closing agent.
If you are selling, you’ll want the deposit check made out to you personally so you can hold onto it yourself, but you should have no problem if the buyer wants to make it out to the closing agent.
Binder Deposits On Realtor ® Listings
When making offers through real estate agents, either on bank owned properties or privately owned ones, you won’t want to give a deposit until you know the seller is ready to accept your offer. This way you do not have a bunch of $1000 checks (or larger) floating around with real estate agents on offers that have not even been accepted yet.
Offering Small Binder Deposits
When making offers through real estate agents or to banks, the earnest money deposits you offer should be reasonable. Otherwise, you will look like a seminar graduate, and the agents and banks won’t take you seriously. So never try to make an offer with a deposit less than $500.
If you really want the deal and want the bank or seller to take you seriously, you can offer several thousand dollars as a deposit if the offer price is around $50,000. For offers of around $150,000, a deposit of $5,000 looks very serious to a bank. Many banks have passed up slightly higher offers and gone with a lower offer just because the lower offer had a substantially higher deposit amount.
Promissory Notes As Binder Deposits
Even worse than offering a small deposit, is trying to offer a note as a deposit. Not only does this send the message that you may not close, but it says that if you don’t close, you probably won’t pay the deposit. It also makes you look like a seminar graduate.
It is better to risk losing the deposit, than risk losing the deal because you offered them a promissory note.