There is no standard as to the amount of money you should receive in escrow when getting an offer. But when representing a seller, I usually want the amount to be somewhere between 3% and 5% of purchase price. Why? The more money there is on the table, the more motivated a buyer will be to close the deal. Off course, we know the buyer would want to close simply because they want the house. But knowing there is money at stake without them yet being the owners…trust me…it elevates motivation.
Its kinda like what Tony Robbins says. What’s stronger than wanting something so bad? The fear of loosing it. And no one likes to loose money.
As far as the escrow agent. Again, when representing the seller, I let the buyer make the choice. I’ve heard other real estate agents say that it is in the interest of the seller to pick the escrow agent so they have control of the money. Not true.
As long as the buyer’s money sits in a title or escrow company created in the State of Florida, the money cannot go anywhere unless both buyers and sellers agree to where it goes. If the title company or escrow agent does not follow the latter, they are breaking the law.
A real estate contract also allows control of when to make such escrow deposits. And you basically have three option. Say you got an offer for $500,000 and the escrow deposit amount is $20,000.
- You may get the deposit all up front when the contract is executed.
- Or split in two…say $10,000 when the contract gets executed and the remaining $10,000 “X” numbers of days after the contract is executed.
- Or you may get the entire deposit “X” number of days after the contract is executed.
What’s my advice? I always negotiate to get 50% of it upon execution of contract and the remaining 50% no later than when the inspection period ends. Say the offer you get allows the buyer 10 days inspection period. For the above example, I would demand $10,000 up front and $10,000 on the 10th day. Why?
Because the inspection period gives the buyers absolute discretion to cancel deal. Yup…they don’t have to even give you a reason. Get the logic?
However, once we get passed the inspection period, things change. That’s when things get a lot more serious and the fun begins.
Got an offer? And want a second opinion on the escrow amount you are being offered? Contact me today!