When you’re buying a home in Austin, you’ll be required to put down two deposits if your offer is accepted. There is often confusion as to what these deposits cover and when they are due. Here, we’ll explain the two deposits and tell you when they must be delivered.
Earnest Money Deposit
Buyers will be required to put down two deposits: earnest money and option money. The earnest money is deposited with the title company and is your good faith money. This tells the seller you are serious about buying their home. If you cancel the contract during the periods of time which you can cancel the contract, you’ll get your earnest money back. If you breach the contract, your earnest money might be at risk.
Customarily, earnest money is usually 1% of the purchase price of the home, but can be negotiated to any amount mutually agreeable to buyer and seller. Earnest money can be paid by personal check made out to the title company negotiated in the contract. The contract says the earnest money is upon execution of the contract.
Option Money Deposit
Option money is payment for the right to cancel the contract for any reason. This money is paid directly to the seller. If you cancel the contract for any reason, the option money is retained by the seller because that was your payment for the right to cancel, which you exercised. If you go through with the purchase, your option money is credited toward your down payment or closing costs at closing. Option money is due within 3 calendar days of execution of the contract. Time is of the essence for the delivery of this money. If the seller doesn’t receive the check within 3 days, you will no longer have an option to cancel.
When Do I Have to Put a Deposit Down on a Home?
When your offer becomes a contract. That is, when buyer and seller have agreed to all terms of the offer, both parties have signed off and the contract is signed. If you make an offer, you do not have to pay the earnest or option money until the seller agrees to all terms, signs and executes the contract. If you and the seller negotiate back and forth, you will not owe the earnest or option money until the offer becomes a contract.
Considering Buying a Home in Austin?
With 58+ years of combined experience in residential real estate, there are no questions we can’t answer. Not only will we help answer all your questions, we’ll help you interpret the market and get a great deal. Check out our Austin Home Buyers section to learn more about our team and how we work. Then, call us at (512) 827-8323, email us at info@11OaksRealty.com or fill out our Buyer Survey to get started. And, remember, hiring an Eleven Oaks Realty buyer specialist to represent you is free! Our fee is paid by the seller.