Deposit vs. Down payment - The Data Advocate

Deposit vs. Down payment ... The down payment is the amount of cash offered by a buyer or purchaser at the time of purchase. Even though the down ... Depositvs.Downpayment byJohnReilly|Aug12,2021|LanguageofRealEstate|0comments Depositvs.Downpayment Thedownpaymentistheamountofcashofferedbyabuyerorpurchaseratthetimeofpurchase.Eventhoughthedownpaymentusuallyincludestheearnestmoneydeposit,thetermsarenotsynonymous.Earnestmoneyisappliedtowardthetotalamountofcashdownpaymentdueattheclosing. Deposit—Moneyofferedbyaprospectivebuyerasanindicationofgoodfaithinenteringintoacontracttopurchase;earnestmoney;securityforthebuyer’sperformanceofacontract.Anearnestmoneydepositisnotnecessarytocreateavalidpurchasecontractbecausethemutualpromisesofthepartiestobuyandtosellaresufficientconsiderationtoenforcethecontract.Ifthebuyercompletesthepurchase,thedepositmoneyisappliedtowardthepurchaseprice.Ifthebuyerdefaults,thecontractmayprovidethatthesellercanretainthedepositmoneyasliquidateddamages.Contractsalsooftenrequirethesellertosplitthedepositmoneywiththebroker,uptoanamountnotexceedingthebroker’scommission(perthetermsofthelistingorthecontractofsale).Ifthesellerdefaults,thedepositshouldbereturnedinfulltothebuyer. Forprotection,thesellershouldrequireadepositlargeenoughtocoverthebroker’scommission,thecostofthetitlesearchandthelossoftimeandopportunitytosellelsewhere.Adepositof10percentofthepurchasepriceshouldbeadequate.Ifthesellerrequirestoosubstantialadeposit,however,adefaultingbuyermightseekareturnofpartofit,claimingthatthedepositdidnotaccuratelyserveasliquidateddamages,butratherasaforfeitureorpenalty.Somestatessetastandardsuchas3percent;ifthedepositexceedsthatamount,thesellerhastheburdenofprovingthatthedepositwas,infact,reasonableandnotapenalty. Ifthedepositinvolvesalargeamountofmoney,itisgoodpracticetoprovidethatthedepositbeplacedinaninterest-bearingaccountforthebuyer’sbenefit. Thebuyershouldbecarefultoensurethatfundsaresufficienttocoverthedepositcheck.Ifthedepositcheckbounces,thesellercouldtrytoterminatethecontractbyarguingthatnovalidcontractexists,astheseller’sacceptanceisconditionalonreceivingaproperdeposit. Thequestionofwhoownsthedepositsometimesarises.Ifthesellerauthorizesthebrokertoacceptdepositmoneyonhisorherbehalf,thedepositmoneybelongstothesellerwhenthebrokeracceptsit.Insomestates,thedepositmoneymustbeplacedinaneutralescrowandcannotbewithdrawnuntilthetransactionisconsummated.Itneverbelongstothebroker,althoughthebrokermayshareinthedepositmoneyifthebuyerdefaultsandthesellerretainsthedepositasliquidateddamages.Inacasewherethebrokerabscondswiththedepositmoney,ifthesellerhasnotauthorizedthebrokertoacceptthedepositmoneythebrokerisactingasthebuyer’sagentinhandlingthemoneyuntilsuchtimeastheselleracceptsthebuyer’soffertopurchase.Thusthebuyerwouldsufferthelossifthebrokerweretostealthemoney.Ontheotherhand,ifthesellerhadauthorizedthebrokertoacceptthedeposit,thesellerwouldsuffertheloss.Suchauthorizationisspecificallycontainedinmanyexclusive-right-to-selllistingcontracts. Downpayment—Theamountofcashapurchaserwillpayatthetimeofpurchase.Eventhoughdownpaymentusuallyincludestheearnestmoneydeposit,thetermsarenotsynonymous.Earnestmoneyisappliedtowardthetotalamountofcashdownpaymentdueattheclosing. SubmitaCommentCancelreplyYouremailaddresswillnotbepublished.Requiredfieldsaremarked*CommentName* Email* Website Δ ThissiteusesAkismettoreducespam.Learnhowyourcommentdataisprocessed. TheDataAdvocate Dataneedsavoice,andthatiswhywedecidedtocreatethisblog.WewillbebringingyouconversationandresourcesthatwebelievearerelevanttotheDataConversationplayingoutintherealestateindustrytoday…sobookmarkusandcomebackoften. –TDATeam Search Searchfor: Tags"Places"AntitrustAppraisalBlockchainBooks/ReportsBrokerageClosing/EscrowCommercialCommissionsCryptoCurrenteventsDATAdatalicensingDatarightsDOJEconomyFinanceFutureGovtAgenciesHousingIDX/VOWLandUseLeadershipLeadsLegalLessonPlanForTheFutureMarketingMetaverseMLSNARNewsOnlineCommunityParadigmRaceRESOTaxTBTTransactionsTrendsVideoWalkabilityWomenZillowZoning ShowMore ShowLess Categories Blockchain Brokerage BuyerBrokerage CryptoCurrency Data DataLicensing Economy Financing Future HousingandLandUse Insights LandUsePolicy LanguageofRealEstate LeadsandLeadGeneration LegalCorner MLSandNAR MultipleListingService(MLS) Paradigm PublicPortals RealEstateNews SocialMedia Uncategorized Walkable Women Zoning