You are ready to buy your Pasadena home and you sit down to write a purchase offer with your agent. Prior to coming to the office, your Pasadena Real Estate Agent will ask you to bring your check book.
Hmmm... Why? The offer has not even been accepted yet, so what is up with the check book?
The reason is simple: Your Pasadena home seller will expect to see an earnest money deposit along with your home purchase offer to prove that you are a serious home buyer.
What you need to know about the earnest money deposit:
- It is usually 3% of home purchase offer price in Pasadena, California. All California purchase contracts have a Liquidated Damages clause which states that if the buyer defaults on the contract, the home seller can keep up to 3% of purchase price. Hence, the sellers real estate agent will look for a 3% deposit from a serious home buyer.
- Liquidated Damages clause needs to be initialed by both home buyer and home seller to take effect and it is customary in Pasadena real estate market to have that clause be part of the home purchase contract. Ill write a separate post regarding why you, a home buyer, should initial that clause.
- Earnest Money deposits are usually tied to the contracts contingency periods. Contingency periods simply refer to time frames for performing specific tasks like getting a home purchase loan.
- Once your purchase offer is accepted by the seller, your earnest money deposit needs to be deposited into escrow within 3 calendar days. This is a standard and expected time frame but can be changed within the contract.
- The earnest money deposit is applied towards the down payment of your home and any incurred expenses.
What do you need to do as a buyer NOT to lose your deposit?
- Work with a reputable and experienced Pasadena Real Estate Agent that understands California Purchase Real Estate Contracts inside and out.
- Get a list of dates for contingency removal deadlinesspecifically
- Verification of Funds
- Loan Approval
- Physical Inspection
- Home Owner Association review and approval of docs like rules & regulations, CC&Rs, budget and minutes for condos and townhomes
- Ensure that you have received and reviewed fully home seller's Transfer Disclosure Statement (TDS) and Seller's Property Questionnaire and all additional home seller disclosures.
- Due your due diligence within your Physical Inspection contingency period. Drive around the area. Talk with neighbors. Go to the city hall to pull permits and ask questions about possible additions or changes to the house that you are considering making. Get a sewer line inspection. Get a roof inspection or a mold inspection if it is recommended by your home inspector or if you have concerns about these issues. Investigate, investigate, investigate!
Understand that once you release your contractual contingencies, you are legally binding yourself to purchasing that home. Should you change your mind later, your earnest money deposit will be in jeopardy.
Questions? Call us at (626) 629-8439
If I can be of any assistance with your Pasadena Real Estate needs, please do not hesitate to email me or call me at (626)629-8439. Thank you!
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Thinking of selling your home? Interested in finding out the current market value of your single family home, condo or investment property? Then call Irina Netchaev at (626) 629-8439 to discuss what is happening in today’s Southern California Real Estate Market.