MONEY MATTERS Thinking about buying a home? You may want to read this article. It blows me away when I think of all the homebuyers that give real estate agents large sums of money as a good faith deposit when they sign a purchase offer on a home. I have had clients that have given agents thousands of dollars when they make an offer on a home and it is one of the dumbest mistakes a home buyer can make! Why? Well, you have to have a very basic understanding of contract law (this is explained in detail in my report) but the quick answer goes like this: Every purchase offer is half a contract-it becomes a contract when it is accepted by the seller. Every contract must have consideration and consideration is anything of value. Money is consideration. So when a homebuyer writes an offer and gives a good faith deposit, the good faith deposit IS the consideration which makes the offer a contract when accepted by the seller. In other words, the money IS what makes the purchase offer binding on a buyer when the offer is accepted by the seller and becomes a contract. And agents LOVE the fact that people put down large sums of money when they write an offer! Why? Well, for starters it shows a serious buyer. Secondly, when a buyer gives an agent a large amount of money like this, the buyer loses temporary control of the cash and the real estate agency holds it in escrow. That gives agents control. What most people dont know is that one-dollar ($1.00) is consideration and can make a purchase offer a contract just as well as $10,000.00. And, when it comes to financing, large good faith deposits dont really do anything to improve the chances of a buyer getting a home loan. You see, that large good faith deposit can be kept in YOUR pocket until you take an application on a loan. In this case, a buyer who wanted to put a large down payment on a home can pay it to the LENDER instead! Inevitably, thats where the good faith deposit gets applied anywayas part of the down payment on a home which is ultimately goes toward the purchase. So why give it to the real estate agent? Yet everyday people do it-they lose the control over the money with no gain whatsoever. Either you are financially qualified to borrow a home loan or not. While a large down payment can help over come funding objections, the agent plays little or no role in the financing end of a real estate transaction. If a borrower is unqualified to borrow a home loan, a very large good faith deposit wont change that fact (.) And buyers better stop and think about the purchase offer! Agents tend to do all the writing on the face of an offer and (seeing how its half a contract) that can be d.a.n.g.e.r.o.u.s! You want your attorney to review that offer before you submit it to a seller (.) Now, one of the angles you may hear is we have to move fast on this deal before the other person buys it. Well, that may be true BUT anytime you find yourself moving fast on a real estate deal (or any business deal) you are WIDE OPEN for mistakes in judgement. If you like the potential for financial pain, do it their way. If you want to protect legal and financial interests, do it my way. Get My FREE E-Report: 101 Tips For Homebuyers, Sellers And Money Borrowers will help you with more information regarding this article-go to smart Books website and follow the simple instructions to request a copy and well send it to your email address within 24 hours-absolutely free. Another Ezine Articles Exclusive! Want some advice? If you are planning on buying a home go to my EBay Store SMART Books and More and order the book Everything A Real Estate Agent Doesnt Want You to Know" for $14.95. I am not trying to hype the book but You WILL save thousands of dollars and protect your legal and financial interests--guaranteed. If you dont like the book, send it back. Ever tried to send a house back? Smart People Read Smart Books! Copyright 2006 James W. Hart, IV All Rights reserved |
