I wanted to give you an idea of what money you will need up front to purchase your home, regardless of whether or not you will get seller paid closing costs or other credits later on at Closing. These are the items that you will need money for almost as soon as you sign your contract:
Due Diligence Fee
- As a Buyer’s Agent, I want to keep this fee as low as possible because it is money that you will not get back if you decide not to purchase the home at any point after you sign the contract. As a Buyer’s Agent, I might try to keep that dollar amount limited to about $100 for every $100,000 you will be spending on the house. As a Seller’s Agent, I will be trying to get as much as possible for the sellers because, in their eyes, we are coming off the market while you complete your Due Diligence. I might ask for an entire mortgage payment or even more, if I think we are going to get multiple offers. The Due Diligence Fee is negotiable, just like every other aspect of the contract, but once you go under contract, you will only get it credited back to you if you actually purchase the home. Otherwise, consider that money gone… money you spend to buy the time you need to complete your research.
- In your contract, you may have agreed to pay your Earnest Money upon signing the contract or you may have agreed to pay it after your Due Diligence Period is over. Either way, if you decide to leave the contract after 5:00 p.m. on the Due Diligence Date, the seller will get to keep that money. I usually will recommend that you offer around $1,000 for every $100,000 you will be spending on the house. That seems like a pittance in other states, but it generally seems pretty acceptable here. Once again, though, the amount of Earnest Money is negotiated along with everything else. If you actually purchase the home, it will also be credited back to you at Closing.
Next time: Due Diligence Cost Estimates, Part II