We’re here to sell houses and chew bubblegum. We’re all out of bubblegum.
Earnest Money FAQ
Earnest money.
You’ve heard about it, been asked for it; you may have even written a check for it. What exactly is earnest money, though, and why do you need it when you buy a house?
Earnest Money FAQ
- What Is Earnest Money?
When buying (or leasing) a home in Scottsdale, you will be asked to put up a good faith deposit to secure your position in the transaction. This consideration is known as an earnest deposit.
- How Much Is It?
Earnest deposit amounts are negotiable. The amount of the deposit is one of the terms of the purchase agreement over which buyers and sellers may haggle. In my experience, a typical earnest deposit on a resale transaction is approximately 1-2% of the total sales price. Builders may require higher deposit amounts for brand new construction (largely due to the costs incurred to build your home). Banks may also require more on REO/foreclosure properties (because they are the spawn of Satan).
- When Do I Pay It?
If you are following the standard boilerplate terms of the current AAR (Arizona Association of Realtors) purchase agreement, your earnest deposit is due upon the agreement being accepted and signed by all parties.
- Who Holds My Deposit?
In nearly all cases, your earnest funds will be held by an escrow company, the neutral third party responsible for transferring ownership from the seller to the buyer. The company employed to hold these funds is another term of the purchase agreement that you negotiate with the seller. Earnest money can also be held in the trust account of one of the Real Estate brokers involved in the transaction, but this eventuality is primarily restricted to the rental arena these days. If you are buying a house, you can pretty much take it to the bank that you will be dealing with an escrow company.
- Is This Extra Money That I Have to Pay in Addition to My Down Payment and Closing Costs?
This is a common misconception. The answer is no, this is not “extra money” that you are being charged. It is a portion of your total closing funds that is simply due up front. Upon closing, your earnest deposit will be applied towards your down payment and/or closing fees.
- What Form Is It Paid In?
Typically, a personal check made payable to the chosen escrow company will suffice, though some opt to wire funds to the escrow company instead.
- Can I Get My Earnest Deposit Back?
This is a loaded question, but yes, there are scenarios in which you can typically retrieve your earnest deposit. Assuming you negotiated the sale using the current AAR purchase agreement, you do have a few outs. First, you have an inspection period (usually 10 days, but negotiable). If you are not satisfied with the condition of the property, or the seller refuses your repair demands, you can withdraw from the transaction and have your earnest money refunded. Of course, this presumes that you have not agreed to any changes in the standard terms of the contract (such as purchasing “as is”, agreeing to non-refundable earnest money, etc).
Under the standard provisions of the contract, you can also get your earnest money back if your loan is declined (after your diligent effort to obtain one under the stated terms) or the home doesn’t appraise for the purchase price (unless you are paying cash as there is no appraisal/financing contingencies to fall back on). Once again, though, and I can’t stress this enough, the terms you negotiate with the seller can alter these provisions.
- What If My Deposit Turns Out to Be More Than I Owe at Closing?
Let’s say that you are employing a 100% financing vehicle, like a VA loan. Let’s also say the seller has agreed to pay for the majority of your closing costs. If the remaining costs owed by you at closing are exceeded by your initial earnest deposit, you are entitled to a refund of the excess deposit.
- Can I Lose My Earnest Deposit
Yes, you most certainly can forfeit your earnest deposit. As the purpose of this deposit is to demonstrate good faith to the seller and invest you in the successful completion of the transaction, your deposit can be forfeited to the seller as damages if you breach the agreement. Failure to close escrow, or backing out of the deal for any reason other than allowed for by a contingency to the agreement, is a surefire way to kiss your deposit goodbye. In the event that you wish to cancel a transaction, be sure to carefully review the terms of your contract with an attorney.
- Who Decides If the Buyer or Seller Gets the Earnest Money if There is a Dispute?
The escrow company that holds the deposit is charged with interpreting the terms of the contract, and has the authority to release the deposit to the party deemed NOT to be in breach of the agreement. Say you, as the buyer, decide that you aren’t comfortable with the neighborhood’s governing covenant’s, codes and restrictions (CCRs). You inform the escrow company (in writing) of your wish to cancel the transaction. The seller objects, claiming that you did not exercise your right to cancel in a timely fashion. You had 5 days from the receipt of those documents to withdraw from the purchase contract, but did not inform the escrow company of your intentions until day 7. Therefore, the escrow company decides in the seller’s favor, and releases the earnest money to him/her as liquidated damages for your breach of the agreement.
Have any additional questions regarding the role of earnest money in a Real Estate transaction? Ask away in the comment section below (or shoot me a private message if you prefer) and I will do my best to address them.
Disclaimer
* It should go without saying that the above is not intended as legal advice. The general explanations may not directly apply to you. As every purchase contract is unique, the internet is not a reliable source for answers to questions regarding your specific agreement. Consult with your agent and/or attorney PRIOR to the execution of your purchase contract to fully understand the terms and protections afforded you.
Final Walkthrough
“I don’t recall the Pontiac being there.”
Sid Gustafson took in the back end of the forest green automobile that jutted out of the modest mid-century ranch. He had closed the purchase on the home mere hours earlier.
The car occupied the space in the living room’s exterior wall where a large picture window had formerly resided. Remnants from the surrounding brick littered the planter box below, dusting the remains of a lantana hedge in terracotta. Glass stalactites dangled precariously from the top of the demolished window, eager to avenge their fallen brethren.
His wife, Nancy, did not respond, but her sharp intake of breath confirmed that he was not alone in his recollection. Sid scanned the license plate that clung to the rear fender by one twisted screw.
“Warp speed,” he interpreted with a dry chuckle. He turned to Nancy, but she lifted a trembling finger to stifle the welling joke. Grudgingly, he let it pass.
“So,” he tried again after a moment of tense silence. “Do you think this is a home or auto claim?”
“Call Adam,” Nancy commanded, her icy voice scarcely more than a whisper.
“Let’s just see-” Sid began to reply before being cut short.
“Now!” Nancy hissed, rounding on him with nostrils flared and murder in the cobalt eyes that lay coiled beneath tight curls of snow white hair.
The crisp autumn air carried on it the chemical smell of burned plastic. Sid was halfway convinced that the barrel fire blazing within his significant other, rather than the smoldering wreckage behind her, was responsible for it.
He removed his cell phone from the front pocket of his jeans, flipped it open, and dialed their real estate agent without further argument.
“Don’t tell me what to do,” Sid mumbled in practiced response to the automated voice that told him to enjoy the playback music before his party was reached. His Realtor’s genial answer came midway through the well-traveled chorus of Paradise City by Guns and Roses. Unfortunately, it was just his canned message assuring Sid of the importance of his call.
“Adam, it’s Sid,” he said after the beep. “We’ve got a problem here.”
He braved a sideways glance at his wife. Somehow, she seemed to have swelled well beyond her sub five foot frame. Malice alone put her nearly eyeball to eyeball with Sid’s stooped six feet and two inches.
“Someone’s in my parking spot,” Sid finished. “Call me back.”
There was a sudden change to the ozone as everything stopped for a moment, a perfect, unnatural stillness cast over the world. Then Nancy exploded.
“Everything is funny to you, isn’t it,” she demanded. “Just one big running joke!”
“Well, guess what, mister comedian,” she continued. “I don’t think it’s funny.”
Sid retracted from the verbal battering to come, an aged hand thick as an oven glove reflexively rising to ward off the blows.
“I didn’t think it was funny when you introduced me at the first office Christmas party as your naughty secretary! I didn’t think it was funny when you told Helen’s third grade teacher that I wouldn’t let her attend the field trip to the dairy farm because I am lactose intolerant!”
“Honey,” Sid pleaded. “This is ancient hist-”
“I didn’t think it was funny,” Nancy interrupted, her face a pleated crimson mask, “when you told everyone that I was just carb loading when I was six months pregnant with Isaac!”
The beginnings of a smile tugged at the corners of Sid’s mouth, but he beat it back before it could materialize into the death sentence it was sure to be.
“I didn’t think it was funny that time you interrupted my bridge group to ask if your speedo made you look fat.”
At this, Sid did smile. He laughed, in fact. A deep, bellowing laugh, unravaged by time, that had won Nancy over so many years ago.
“I didn’t think it was funny when you asked the bishop if he was a boxers or briefs man.”
A slight smile betrayed her, however. The angry maze of wrinkles began to disband, reestablishing itself along the deeper grooves of her laugh lines.
“I really don’t think it’s funny that there’s a car sticking out of our new house.”
Now, Helen was closing her eyes and shaking her head. Staying angry at her lovable goof of a husband was like cursing the tides. He was who he was. In truth, she was mad at herself. She was the de facto iron fist, responsible for steering their ship when Sid, the drunken captain, inevitably fell asleep at the wheel. It had been an unusually hectic week. Things that she would ordinarily never miss, got missed. And here they were.
“And I really, really don’t think it’s funny that you forgot about the final walkthrough that you promised to do before we signed the closing papers.”
Sid pulled her close and held her tight. Resigned, her breath came slow and steady against his chest.
“What are we going to do,” Nancy whispered.
The phone rang.
Sid answered on the second ring, interrupting the vaguely robotic factory-programmed tone from 2006 that he had never bothered to reset.
“Hi Adam,” he responded without checking the caller ID. The only other person who ever called him at this number was standing next to him.
“About that home warranty policy the seller bought for us …”
“Does it include windows?”
CALL ME
Leaning back in a black leather swivel chair while he pondered the day ahead, Jimmy Dietz closed his eyes against the rising glare from the room’s only window. For perhaps the millionth time, he cursed his decision to select the only bedroom in the house with eastern exposure for his home office. That had been the whole point, of course, to leverage the insistent sun as a secondary alarm clock, this one to force his weary mind to catch up to his body’s head start.
He was tempted to steal another glance at the clock, but knew it would only bring disappointment. It would be at least another five or ten minutes before the sun would rise above this petty torture and continue its ascent towards a more fitting celestial perch.
He did cautiously open his eyes, however, when a familiar buzzing cut through his silent lamentation. Grimacing against the opportunistic sunlight, he took in the sight of his shuddering iPhone as it vibrated on the desktop. He reached for it, half expecting to feel the sting of an angry electrical bee when his slender fingers closed around its cool metal housing.
“This is Jimmy,” he informed the caller.
“Hello,” he tried again when he received no answer. “This is Jimmy.”
Still no one. He removed the phone from his ear and looked at it, realizing his mistake. He was talking to a text message notification. He tapped the prompt on the screen to view.
CALL ME, the message read.
Jimmy recognized the number as belonging to an agent he had worked with on a rental transaction the previous month. It was burned into his memory by the scores of similar messages he had received in the ensuing weeks.
The phone jumped in his hand.
ITS URGENT, A new message assured him.
911, another added for good measure.
Here’s a thought, Jimmy seethed. Why don’t YOU call ME?
Resisting the urge building up within him, Jimmy instead began to slowly count to ten. Just as the throbbing in his carotid artery started to ease, his phone buzzed again.
“Seven,” he breathed in disgust as anger flooded his happy place before he had the chance to find it.
ITS STEVE WILLITS WITH DESERT DOMICILES RLTY
“You don’t say,” Jimmy hissed at the empty room.
RE 8539 E. RAVINE PKWY
Jimmy stared at the screen, incredulous as a series of messages came through in rapid succession.
TENANT SET OFF ALARM
DOESNT RMEMBR CODE
DOG BARKING AT ALARM
POLICE HERE
WONT GO IN BC OF DOG
Jimmy began to laugh.
R U THREE?
*THERE*
Jimmy laughed even harder. For the life of him, he didn’t understand the younger generation. How could anyone in sales prefer one way communication to an actual dialogue with a real, live human? How was anyone supposed to hash out anything of consequence one line at a time?
Then again, he thought, maybe he was the idiot. Why use a perfectly good texting device to make something as antiquated as a phone call? The other party might not go along with whatever I have to say.
DOG JUST BIT A COP!!!
Not for the first time, he wondered how much longer he was for the business.
WHY WONT YOU ANSWER???!!!!
Smiling, Jimmy relented. Out of practice with the virtual keyboard, it took three minutes for his thumbs to find the right sequence of characters. Breaking the apparent protocol, he scanned his message for grammatical errors. He swore as another message came across in the interim, interrupting him.
WELL????!!!
He pressed send.
Because this is Pizza Hut, asshole.
A response came back in seconds.
THS FUNNY 2 U?!
No. Jimmy replied, quicker this time. You’re right. This is serious.
No response. Jimmy’s smile broadened as he pictured his counterpart staring intently at his phone, eagerly anticipating the forthcoming assurance that helicopters would scramble and the world would stop until this latest fiasco was resolved by anyone other than himself.
He lingered for a moment, savoring the new aroma of freshly brewed coffee that emanated from the adjoining kitchen as he gave that expectation room to grow.
Satisfied, Jimmy finally began typing.
He realized that the sun was no longer in his eyes. He relaxed his defensive squint, his hazel eyes rounding into their usual mischievous shape. He scanned his message for errors and pressed send. He then placed the phone on the desk, stood, and strode out of the room in search of caffeinated goodness.
On the desk, the phone remained momentarily illuminated, briefly displaying the sent message.
No pets allowed. Eviction proceedings started.
The screen went dark.
Moments later, in the empty room, the phone began to ring.
McCormick Ranch Open House 1-5 PM, 6/14 & 6/15
You Are Invited!
Please join us this Saturday and Sunday (6/14 & 6/15) between 1-5 PM at 8210 E. Del Claro Dr in McCormick Ranch. David Levy with Realty Executives will be holding open one of the finest properties in the premier Island at McCormick Ranch subdivision. Fully remodeled and within a short walk to Lake Margherite, Lake Nino and Lake Angela, this is the one you’ve been waiting for! Hope to see you there.
McCormick Ranch Open House 6/7 & 6/8
You Are Invited!
Please join us between 1-5 PM this Saturday and Sunday (June 7th & 8th) for an open house at 8210 E. Del Claro Drive in McCormick Ranch.
Featuring 4 bedrooms (plus office), 3 baths, swimming pool, 3 car garage, and over 2600 sq ft of exquisite modern remodeling, this may be your one and only chance to see it before it’s gone!
MLS# 5123529
Offered for sale at $699,500
When: June 7th & 8th, 1-5 PM
Where: 8210 E. Del Claro Dr, Scottsdale, AZ 85258
Who: Hosted by David Levy, Realty Executives
Not Just McCormick Ranch … The ISLAND at McCormick Ranch
You circled McCormick Ranch on your home search map with a bright red sharpie. One stroll through the greenbelt past the parks, lakes, restaurants, and award-winning schools was enough to convince you that this … this … was the Scottsdale you were after.
Perhaps you even took note of the few subdivisions that line the shores of Lake Margherite, the crown jewel of this desert oasis.
Could you just imagine the charmed lives of those fortunate home owners? Of course you could. You’ve cast an envious eye at the content residents who enjoy their morning coffee as they walk their dogs along the banks of the lake. You’ve marveled at the easy smiles and languid pace that fly in the face of the uptight, go-go world that exists beyond these grassy confines.
If only you could afford it.
Guess what? You can.
Tucked within the coveted Island at McCormick Ranch subdivision, the dazzling home at 8210 E. Del Claro is nothing short of a revelation. Within a leisurely stroll of the lake, but without the lakefront pricing, this exquisitely remodeled contemporary features 4 bedrooms plus a den, 3 baths, private swimming pool, and that rarest of McCormick Ranch birds … an honest to goodness three car garage.
The upgrades … where to begin? Travertine flooring greets you at the front courtyard, and follows you inside the home.
And the kitchen. Ah, the kitchen. Completely overhauled with new high gloss white cabinets, quartz counter tops, stainless steel Bosch oven and microwave, stainless steel LG refrigerator, Bosch cooktop, and Energy Star LG dishwasher, this kitchen represents modern living at its finest.
Not to be outshone, the redesigned master bathroom commands attention with its new oversized tub and spacious walk-in shower. Bathrooms 2 & 3 are certainly no slouches either with their own custom touches. All finishes, from the stone surrounds to the plumbing fixtures and cabinet hardware were painstakingly selected by homeowners who cut no corners and spared no expense in bringing their vision to life.
The generous-sized swimming pool was upgraded in 2012 with a pebble surface, travertine paver surrounds, removable child fencing, Intellichlor salt system, new Pentair cartridge filter, and a new 5 speed variable Pentair Intelliflo pump.
The owners weren’t done in the backyard. They also built new shade covers on two rear patios, overhauled the landscaping (including sprinkler lines), and more.
This was not a property that was intended for sale. This was a labor of love, as evidenced by the structural improvements that accompanied the cosmetic enhancements.
All rooms wired with network and coax outlets? Check.
Living room wired for surround sound? Check.
All new bathroom plumbing complete with recirculating hot water lines? Check.
Whole house Pelican PSE 2000 water treatment and softener system installed? Check.
New foam roof (2011)? Check.
Seriously, who replaces ALL of the wiring in their home and upgrades to a 40 breaker service panel? These folks do.
This property is a rare gem, and do you know who deserves the privilege of calling it home?
You do.
Contact us today at (480) 220-2337 for a private viewing.
Ray & Paul Slaybaugh
Realty Executives
Your McCormick Ranch Experts
______________________________________________________________________
Cover Letter
Dear Francis,
I showed your property at 123 E Via Linda yesterday, and my clients absolutely loved the home. As evidence, please find their attached offer. Knowing you are likely to receive additional offers on this listing, allow me to provide a little background on the buyers.
Niels and Maureen, or “Nemo,” as I call them, are being relocated from Indiana by Iradium Technologies, where they work in the product testing division. They have three glowing children between the ages of one and seven, so the property falling within the Cochise Elementary School district is a huge selling point for them. Nothing is more important to them than Joseph, Joselyn and little Jo Jo.
Niels is a veteran of both the Salvation Army and the Peace Corps. Crazy, but VA financing is not available to our soldiers of righteousness, so they are going to go FHA. Just as soon as they convince one of their parents to gift them the down payment funds. Maureen’s mother is gullible, but forgetful. Rest assured, they’ll secure those funds eventually. They don’t have any money for closing costs either, what with the medical bills for the kids, so asking the sellers to credit them the maximum allowable 6% of the purchase price. We are also asking them to leave the glassware and a few rolls of toilet paper. The pot pies in the freezer would go a long way.
Having been beaten out by “better” offers several times already, my clients will do whatever it takes to win the day. In fact, they have authorized me to offer the sellers full use of the guest shower for up to a year after closing, provided they contribute to the water bill and be mindful of the peak hours for the load controller we are asking the sellers to install prior to the close of escrow.
Lacking the funds for an earnest deposit, they are willing to offer the indentured servitude of any two of their three children en lieu of cash consideration. Joseph is the biggest and strongest, but he requires the most food and sleep. He seems to have hit a growth spurt. He eats nearly every other day, and often has to be roused after three hours of sleep to make it to his day job on time. Joselyn may not look like much, but she’s steady. She’ll work from sunup to sundown without a break. Don’t be fooled by little Jo Jo, either. He may not be the most mobile of the three, but he will clean the hell out of whatever spot you plop him on. As long as you are willing to move him every couple of hours, he’ll knock out a room better than any service you’ve ever hired! They all tend to bleed profusely from their ears and noses. Just an fyi.
As you can see, this is the house for my clients. While you may receive higher offers from more qualified buyers, they are all terrible people who will defecate upon the sellers’ memories of this very special home. My clients will only defecate in the bathrooms. Well, not the one they have reserved for your clients’ use. That would be rude.
We humbly ask that you choose us. Pre-possession works, right? Niels is a bit of a snorer, but he’s a wiz with little fixes around the house. The moving van is scheduled for tomorrow. We’ll need help paying for it.
Respectfully,
Will U. Hepme, REALTOR
Tips For Selling Your Home By Attending All Showings
1. Don’t.
4128 E. Hancock Dr: Remodeled and Ready for You!
There are remodels and there are REMODELS. This exquisite home stands out in the sea of haphazard remodels and cheap investor fix and flips that dominate the Scottsdale and Phoenix Real Estate market at present.
Located in the highly coveted Sequoya / Cocopah / Chaparral school district trio, this property features over 2200 square feet of remodeled excellence. Complimenting the mid 1990s architecture (rare newer home in this location), recent renovations include a complete kitchen overhaul. Highly upgraded level 4 slab granite counters and tumbled stone backsplash with granite in-lays top the warm, furniture-grade cabinetry. Whether you are a culinary novice or an accomplished Iron Chef, the new stainless steel Kitchenaid appliances are an absolute delight. As to the generous kitchen island, the term “continent” might be more appropriate. Featuring additional storage, breakfast bar and built-in wine rack, this is a work of carpentry art.
Much as you’ll want to linger in your new kitchen to savor every dining experience, you’ll eventually be drawn away by the allure of additional surprises. The sumptuous master bathroom is nothing short of a revelation. Featuring the same furniture grade cabinetry and slab granite counter tops that make the kitchen so appealing, the master bath includes a walk-in shower with dual showerheads. In need of a little rest and relaxation? There is no better place to unwind than in the new deep soaking tub. Forget about the day’s stresses until you reluctantly emerge to rejoin the land of the living.
Rounding out the master suite is a generous walk-in closet, and new French doors that lead directly to the backyard.
Of course, you need not travel far to find additional upgrades, for you are greeted with beautiful 20″ porcelain tile and new extra-tall baseboards as soon as you step through the front door. Along with new plantation shutters, ceiling fans and light fixtures, these features stretch throughout the home. Even the guest bath and laundry room have been overhauled with the same upgraded cabinetry and granite that we encountered in the kitchen and master bath. In short, nothing has been left undone.
As you might suspect from the amazing attention to detail, this unique home was painstakingly transformed by the current owners over the course of nine months to serve as their ultimate sanctuary. This was not to be a fix and flip, plans have simply changed.
The flexible floor plan includes two bedroom plus a den (could easily be converted to a third bedroom if desired), and an open great room concept. This is low maintenance living as the homeowner’s association is responsible for front lawn maintenance. The small patch of grass in the rear yard offers an inviting, manageable retreat. Suitable for permanent and seasonal living alike, the property is well-matched to the needs of a wide range of buyers. Whether you are searching for a home in the most coveted school district in the state or you are in the market for lock-and-leave vacation living, 4128 E. Hancock Drive can accommodate you.
There are many more upgrades than I can possibly list here, but I would be remiss not to mention the stacked slate stone (gas) fireplace in the family room, new French doors in the breakfast area, surround sound, security system and all new interior paint. You simply must view this property in person to fully appreciate all that it has to offer.
Offered for sale at $400,000.
Call Paul Slaybaugh with Realty Executives to arrange your private viewing today.
(480) 220-2337
Equal Housing Opportunity
Available in Aviano
Welcome to Aviano, a top-of-the-line Toll Brothers enclave in Desert Ridge. Conveniently located just north of the Loop 101 and Tatum Boulevard, Desert Ridge offers shopping, golf, resort living, excelling schools and more. Additionally, Aviano itself offers a community center with pool, spa, gym, parks, etc.
And that’s just the setting.
The wonderful home at 3524 E. Expedition Way offers an unrivaled package of newer construction (built 2006), size (nearly 4000 sq ft), and craftsmanship. The generous island kitchen alone is worth the price of admission. With upgraded, cherry-stained cabinets, slab granite counter tops, and stainless steel appliances (GE Monogram and Profile series), you’ll enjoy staring at your new kitchen just as much as using it.
The kitchen opens to the family room (with wet bar), and looks out to the large backyard. Unlike many homes in the neighborhood where the properties are shoe-horned together, this one sits on a nearly 10,000 sq ft lot that is large enough to hold a pebblesheen swimming pool (fenced), expansive patio area with cobblestone pavers, and a children’s play area. Feel like a dip in the pool? No need to bring the chlorine back inside with you when you are done, just have a quick rinse under the outdoor shower.
Back inside, the size of this home is not wasted. Including formal living and dining rooms in addition to the family room, there is plenty of entertaining space to go along with the 4 large bedrooms and downstairs den/office.
The master suite is truly something to behold. Large enough to segment into a separate sitting room area if you prefer, the master bedroom looks down upon the backyard. You also have desert and mountain views from these windows. The master bath includes a separate shower and tub, and his & her vanities.
And the closet … oh, what a closet. To call it a “walk-in” would be doing it a disservice as you just keep on walking and walking. Partitioned into his and her sections, this enormous closet is the size of a bedroom in many other homes.
Of course, what would all of this space be without a little extra storage in the garage for your vehicles or toys? The three car bay (one tandem) is just what the space-conscious doctor ordered.
Not to give additional features like the new interior paint (2012), security system, water softener, etc short shrift, but everything else is just icing on the cake. You must view this home in person to fully appreciate all that it has to offer.
Offered for sale at $629,000, this terrific property is more than a place you will be proud to call home, it is an incredible value. Don’t take our word for it, however. Be sure to visit every competing home in the area, then come see us.
Just be quick about it.