What is a buyers’ initial deposit on a Mission Viejo Home?

What is a buyers’ initial deposit on a Mission Viejo Home?

When you find the perfect house and come to an agreement with the seller about the price and terms, you’ll need to actually have to give escrow the money for the initial deposit on a Mission Viejo home.  Most home buyers are understandably curious about what that initial deposit on a Mission Viejo home is all about.  Questions like:  What’s an initial deposit?  How much does the initial deposit need to be? Does the initial deposit count toward the down payment?  Do I have to pay the deposit when I make an offer?  What happens to my deposit if I decide I don’t want to buy the house after all?  So here’s the story on the initial deposit on a Mission Viejo home to answer all of those questions.

The initial deposit is typically paid to escrow within three days of an accepted offer or accepted counter offer.  It can be paid by personal check, cashiers’ check, or wire transfer.  It cannot be paid with cash, a credit card or foreign currency.  The amount of the initial deposit is typically 1% of the purchase price, but some sellers are asking for 3% of the purchase price.  Three percent is the maximum amount the seller can keep if the buyer cancels after all contingencies have been removed.  More on that topic in a minute.

The initial deposit is held by escrow for the duration of the escrow.  It is credited toward the buyers’ down payment and if there’s any left over after that, it goes toward paying the buyers’ closing costs as well.  It is not an additional payment on top of the down payment.  Consider it an early payment of the down payment.

If, during your inspection period, you discover some material fact that causes you to want to back out of the purchase, there are three things that can happen to your initial deposit.  Number One – If you cancel the contract within your investigation period and you have not yet removed all of the contingencies in writing, you are entitled to receive your initial deposit returned to you.  Number Two - some escrow companies charge a cancellation fee.  And you may be on the hook for the HOA documents escrow had to pay for, which they will deduct from your initial deposit.  But for the most part you come out financially unscathed if you cancel before the end of the investigation period.  Number Three – the seller might refuse to sign the agreement to cancel the purchase contract.  The longer the seller delays in agreeing in writing to cancel the contract, the longer your money is essentially held hostage.   Then you get to decide whether to take the seller to mediation and/or arbitration to get back what is due to you.  Ouch.  You also might have paid a home inspector and an appraiser out of your pocket.  No refund coming from those guys, sorry to tell you.

If you cancel AFTER you have removed all of your contingencies in writing, then the financial sting is a bit more severe.  The current version of the California purchase contract allows the seller to keep the entire deposit up to 3% of the purchase price.  Ouch.

So there you have the buyers' initial deposit on a Mission Viejo house in a nut shell.  Necessary to pay when due.  Subject to certain binding cancellation rules.  Credited to the actual down payment and closing costs due from the lucky buyer of a splendid Mission Viejo home.

I'm Leslie Eskildsen.  Just keeping it real in Mission Viejo real estate.

Call me.  949-678-3373

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Email me.  Leslie@LeslieEskildsen.com

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