ACL Reconstruction Day 3

ACL Recontruction Day 3

Earnest Money Deposit

 

Home buyers always ask how much of an earnest money deposit is required. Typically, there is no set requirement. In California, contracts must contain consideration to be valid, but that amount can be as little as one dollar. Laws in your state may be different. Bear in mind, however, that the amount of your earnest money deposit depends primarily on your marketplace and local custom.

If you offered a seller a $1.00 as an earnest money, the seller would look at you funny.  It probably won't fly.

 

What is an Earnest Money Deposit?

It's a good faith deposit but not to be confused with a down payment. When buyers execute a purchase contract, the contract specifies how much money the buyer is initially putting up to secure the contract, to show "good faith," and how much money all together will be deposited as a down payment.

The balance is generally financed as a mortgage or a combination of mortgages. An earnest money deposit says to the seller: "Yes, I am serious enough about buying your house that I'm willing to put my money where my mouth is."

So, How Much Earnest Money is Enough?

Because there is no set amount, it varies from market to market and across the country. Where I work in California, deposits are generally 1 to 3 percent of the sales price. Buyers here do not often put down more than 3% since most sign a liquidated damages clause that limits the seller to 3% of the purchase price as damages in the event of a default. But it's not unusual for a buyer purchasing a $300,000 home to put down $1,000, especially if the buyer is obtaining 100% financing, like a VA loan.

In those scenarios, the deposit is most often refunded to the buyer and subsequently used as a credit toward closing costs because the financing makes up the entire purchase price.

If it's a seller's market, with many buyers fighting over limited inventory, it makes logical sense for the buyer to put down a much larger earnest money deposit to entice the seller to accept the offer.

In buyer's markets, a larger earnest money deposit might entice a seller to accept a much lower purchase price. So you see, it all depends.

Be Careful to Whom You Give Your Earnest Money Deposit

 

•Never give an earnest money deposit to the seller. Doesn't matter if the seller is the Pope, don't do it.

•Make the deposit payable to a reputable third party such as a well known real estate brokerage, legal firm, escrow company or title company.

•Verify that the third party will deposit the funds into a separately maintained trust account.

•Obtain a receipt.

•It is not advisable to authorize a release of your earnest money (or a pass-through) until your transaction closes.

Is Your Earnest Money Deposit Refundable Upon Cancellation?

First, read your contract. Laws vary from state to state. In California, standard C.A.R. purchase contracts allow for the return of the earnest money deposit to the buyer within a specified time period, by default 17 days, should the buyer elect to cancel the transaction. If, at that point, the seller refused to return the deposit without cause, the seller could end up paying a $1,000 civil penalty to the buyer.

Upon cancellation, the sellers and buyers are asked to sign mutual release instructions. If an agreement cannot be reached, the party holding the earnest money deposit will continue to hold it until an agreement is reached. If no agreement has been reached after a few years, escrow companies then send the parties a certified letter asking for mutual instructions. The letter says if nobody responds within a certain time period, then escrow will return the money to the buyer. If the seller contests the action then, after 3 years, escrow will send the money to the state of California, presumably to help balance our sucky budget deficit.

New home sales highest since 2008

New home sales for single families totaled 552,000 homes last month. That's the best monthly figure since February 2008 and an encouraging sign of the housing market's momentum.

It was nearly a 6% increase from July, which was also revised up, according to the Census Bureau.


Still, the figure is a far cry from the historic average: the average monthly number of new home sales over the last 30 years is 706,000 according to Peter Boockvar, chief market strategist at the Lindsey Group.

"Today's figure is encouraging but we've got a LONG way to go," Boockvar wrote in a note to clients.


Some economists believe there could be an uptick in home buying as prospective home owners try to lock in a low mortgage rate before the Federal Reserve raises interest rates.


The average rate on a 30-year fixed mortgage in August was 3.9%, very low on a historical basis. A decade ago the rate was about 5.8% and 20 years ago it was 7.8%.


The central bank is now expected to raise rates in either October or December.

 

www.wcrealtyandfinance.com

 

Was my home a good investment?

 

Take a look at this calculator: Click this Link

 

 

www.wcrealtyandfinance.com

Mortgage credit availability easing says Fannie

Mortgage credit availability easing says Fannie The latest survey of mortgage lenders by Fannie Mae shows that lending restrictions eased in August. The poll of senior mortgage executives also reveals that they are generally more optimistic than general consumers about the economy, future home prices and the ease of getting a mortgage today.

“For the first time in seven quarters, we see a pronounced increase in the share of lenders, particularly medium- and larger-sized lenders, reporting on net an easing of credit standards in both the GSE eligible and non-GSE eligible loan categories. This is a significant result in light of public discourse on credit availability and standards,” said Doug Duncan, senior vice president and chief economist at Fannie Mae.

Mortgage applications 7 per cent lower last week
The level of new mortgage applications fell for the week ending Sept. 11 2015 compared to the week earlier. The Mortgage Bankers’ Association’s analysis found that on an adjusted basis there were 7 per cent fewer applications even taking into consideration the Labor Day holiday.

On an unadjusted basis, the weekly index decreased 17 per cent; the Refinance Index decreased 9 per cent; the seasonally adjusted Purchase Index decreased 4 per cent; the unadjusted Purchase Index decreased 16 per cent.
The refinance share of mortgage activity decreased to 56.2 per cent of total applications from 56.9 per cent the previous week. ARM decreased to 6.8 per cent; FHA share increased to 14.2 per cent from 13.4 per cent; VA share decreased to 10.7 per cent from 10.8 per cent; and the USDA share remained unchanged at 0.8 per cent.

Builder confidence still rising
The National Association of Home Builders says that the confidence of its members continues to rise. In its latest Housing Market Survey in conjunction with mortgage lender Wells Fargo, the association’s index rose 1 point to 62 per cent confidence in the market for newly-constructed single-family homes. That’s the highest reading since October 2005.

"NAHB is projecting about 1.1 million total housing starts this year,” said NAHB Chief Economist David Crowe. “Today's report is consistent with our forecast, and barring any unexpected jolts, we expect housing to keep moving forward at a steady, modest rate through the end of the year.”

Looking at the three-month moving averages for regional HMI scores, the West and Midwest each rose one point to 64 and 59, respectively. The South posted a one-point gain to 64 and the Northeast dropped one point to 46.

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