If you are buying a home in Anchorage or the Mat-Su Valley—or if you happened to read our 10 Alaska Real Estate Terms Every Buyer Should Understand—you will hear the term earnest money and it is helpful to have a general understanding of what this means. Once you have found your dream home, the next step in the process will be to put down a sum of money to show you are serious about making the purchase. This sum is called earnest money and if not done correctly, could end up costing you thousands in the long run!
Below are a few earnest money mistakes to avoid to help your home purchase in Alaska move along with as little stress and obstacles as possible!
Misunderstanding the term
As we mentioned above, earnest money is a real estate term every buyer should understand when making an offer on a home. The sole purpose of this deposit is to show the seller that you are committed to following through with the purchase. While the amount can be flexible, it is typically 1 to 2 percent of the home’s purchase price and keep in mind, it can also be used as a credit toward either you down payment or closing costs.
Offering too little
When deciding how much earnest money to put down, note that offering too little could make the seller think twice. Especially as we head into the busy real estate buying season ahead, a home could receive multiple offers and if your earnest money deposit is less than another offer, the seller may toss yours out entirely.
Keeping contingencies in place until you are completely certain that you can close on the home is a wise move. If you remove your loan contingencies, you could risk losing the room you need to negotiate the home sale in addition to the earnest money you put down.
Ignoring the “As Is” home label
If you’ve found your Alaskan dream home, but it comes with the label “As Is,” you will need to weigh the risks involved. Purchasing an “As Is” property means you are inheriting all of its problems and necessary repairs— nothing will be fixed prior to the sale. Buyers should be aware that these properties often require a nonrefundable earnest money deposit and if you need to cancel the sale later, you will not get this money back.
Navigating the home buying process can feel overwhelming— that’s where Northern Edge Real Estate comes in! Allow our experienced team to guide you in the right direction, answering all of your questions along the way. Give us a call to discuss your next steps or for a list of available homes in the area.