Deed in Lieu of Foreclosure an Option When You Default on Your Mortgage

Despite the fact that the prevalence of foreclosures has decreased since the housing crash a decade ago, it still happens quite often. In fact, almost 1 million U.S. homes were in the middle of foreclosure proceedings last year.

Foreclosures not only wreak havoc on your financial health and your credit rating, they can also be emotionally devastating. Being forced out of your home is a nightmare that no homeowner wants to go through, but if you default on your mortgage, you risk going down that ugly path.

Fortunately, there are ways to curb foreclosure proceedings if you find yourself in default of your mortgage, and one alternative is to work out what’s known as a ‘deed in lieu of foreclosure’.

What is a Deed in Lieu of Foreclosure?

Basically, a deed in lieu of foreclosure is a specific type of arrangement whereby you voluntarily give up the deed to the house to the bank in an attempt to avoid the full foreclosure process. Foreclosure is a long, drawn out, exhausting process that is not just an unpleasant experience for you, but for the lender as well.

Like foreclosure, you will still have to vacate the home with a deed in lieu, but you’ll be able to avoid involving the courts as would be the case with a formal foreclosure. But once all of your interest in the property has been handed over to your lender, your defaulted mortgage will be considered completely satisfied.

The actual nitty-gritty details of a deed in lieu of foreclosure will vary depending on the bank, but the process typically starts off with a few missed mortgage payments. The bank will then notify the borrower of the defaults, and if both the lender and homeowner agree, a deed in lieu of foreclosure process can start. At that point, you’ll be asked to move out of the home and submit the deed to the bank who will then be considered the owner of the property.

After the deed in lieu documents are signed by the homeowner, the process is complete.

Are You Eligible For a Deed in Lieu of Foreclosure?

Before you set your sights on this alternative to foreclosure, you will have to see if your lender agrees to this process and if you are even eligible for it.

For instance, if your bank thinks that they will be able to recoup more of their money by going the foreclosure route, you might be turned down for a deed in lieu. You might also be rejected if there are any subsequent liens filed against the home. In this case, these liens will become the lender’s responsibility if they’re not released before a deed in lieu of foreclosure is agreed upon.

A property with more than one loan against it may also not be eligible for a deed in lieu of foreclosure. The lenders holding the second (or third, etc) mortgage will probably not agree to a deed in lieu of foreclosure because it will be extremely difficult for them to get their money back by taking this route. Once the home has been sold, the odds of there being any funds left from the proceeds of the sale to pay off all other lenders are quite low.

Why is a Deed in Lieu of Foreclosure the Better Alternative to Foreclosure?

It might be tough to even imagine there being any pros to a situation whereby you’re being kicked out of your home. But a deed in lieu of foreclosure can come with certain benefits over enduring a full foreclosure.

If you’ve been given the green light to go ahead with a deed in lieu of foreclosure, you may be able to get away with not having to repay your lender back any money if there is a discrepancy between what the lender is able to sell the home for and what you still owe on the mortgage. In the case of a foreclosure, lenders often take the defaulted borrower to court in an effort to get back this difference. With a deed in lieu, you’re more likely to be forgiven for this deficiency.

A deed in lieu of foreclosure is also a much faster and less invasive procedure compared to the alternative. Once you leave the home and it’s sold by the lender, the mortgage is cleared and the process is typically over. This can be done and over with in a matter of a couple of weeks compared to a foreclosure process which can take months and even a year or more to complete.

While your credit score will take a hard a hit with a deed in lieu just like it would with a full foreclosure, you will probably have an easier time getting approved for another mortgage or other type of loan in a shorter amount of time, usually within two or three years compared to at least seven with a formal foreclosure.

The Bottom Line

Defaulting on your mortgage likely result in heavy consequences, including being forced out of your home after foreclosure proceedings have begun. But you can effectively stop this process from starting by immediately contacting your lender after your first missed mortgage payment. It’s possible that your lender may be willing to work something out with you if you show that you are eager to settle the matter.

If you and your lender are unable to come up with a resolution, contact a credit counselor who may be able to offer you some counseling and introduce some workable debt management strategies that might make it possible for you to make additional money available to make your mortgage payments before going into default.

If foreclosure is imminent, a deed in lieu of foreclosure may be your last resort in order to avoid the nasty and lengthy process that inevitably follows. While you will still wind up losing your home, the end result is slightly better for your financial health overall.

Best Waterfront Towns in California

California is known to have some of the best beaches in the world, giving both locals and tourists the pick of the litter. With so many awesome beach towns to choose from, it can be tough to decide which one to visit first or even plant roots in.

Among all the beach towns in California, these are some of the best.

Santa Cruz

Santa Cruz is the epitome of California Surf Town, offering a low-key atmosphere amongst its high tides and amusement park. The hub of Santa Cruz is its beach boardwalk that’s visited by locals and tourists alike during all times of the year. Catch some waves, ride some classic coasters, and dine on timeless carnival fare while watching people pick up a spontaneous latin dance session in the middle of the street.

Going further out into the ocean will afford up-close-and-personal views of humpback whales and other sea creatures that you wouldn’t see anywhere near the shoreline. End the day with some local fish fare and a glass of your favorite red or white from any one of the wide array of wineries.

There are plenty of housing options to choose from, though not exactly at an affordable price tag. Median home prices in Santa Cruz currently go for $830,000.

Monterey

Nestled in the cove of Carmel Bay is Monterey, a lovely beach town that attracts a ton of visitors every day thanks to its pretty beaches, water-side parks, and fun social scene. The Monterey Peninsula boasts a number of casual and fine dining options along its quiet coves, as well as its classic and contemporary art galleries.

In addition to driving up the coast, another great way to indulge in the surrounding natural beauty is to rent a bike and peddle around the peninsula to Pacific Grove and take part in the 17-Mile Drive Tour.

On the south end of the Monterey peninsula is the eclectic art scene at Carmel-by-the-Sea. There’s no shortage of natural beauty thanks to its quaint coves, crashing waves, white sands, rocky backdrop, and tree-shaded trails. Further in is Carmel’s main village that’s filled with art galleries, high-end pubs, and cute inns.

This beach town is slightly less expensive than its Santa Cruz neighbor, with the median home price sitting at $747,200.

Encinitas

Despite being in close proximity to the beaches of bustling Los Angeles and San Diego, Encinitas is one of those beach towns that has still managed to maintain some serenity without being engulfed by urban sprawl that’s characteristic of the aforementioned cities. Encinitas continues to be a hot spot for avid surfers who seek out some of the best waves on the west coast.

After a big surf, the old downtown core is the place to hang out. The center of the city features all sorts of timeless delights, including a host of different types of bars and restaurants. There’s also the La Paloma Theater and two historical boathouses to check out too.

Like Santa Cruz, you’re paying for such delectability at your fingertips with housing prices well over the median statewide price. The median house price in Encinitas stands at $958,400.

Laguna Beach

Like all the other beach towns on this list, Laguna Beach is arguably one of the most picturesque waterfront spots in Southern California. This small coastal city is well-known for its various coves, beaches, tide pools, and boardwalk on Main Beach. Lots of surfers take to Aliso Beach Park to catch some waves and visitors enjoy meandering through all the beaches’ trails and coastal canyons.

Aside from natural wonders, Laguna Beach also boasts a vibrant social scene with a variety of awesome eateries and bars, art galleries, and boutique-style shops.

Living in Laguna Beach is certainly not on the affordable end of the spectrum, with the median house price in the area fetching $1,548,000.

Santa Monica

A swankier beach town in Southern California is Santa Monica, a vibrant waterfront community on L.A.’s coast. Miles of wide beach areas line the coast of Santa Monica, pierced with its infamous pier and boardwalk. Fun in the sand by day and unique dining and entertainment options at night, Santa Monica makes for the perfect spot for vacationers.

Those who call Santa Monica home take advantage of the incredible shopping available with plenty of shops to choose from thanks to the likes of Santa Monica Place and Third Street Promenade.

The median home price for a place in Santa Monica currently stands at a whopping $1,400,000.

Coronado

It’s easy to experience small-town charm while still living in the city with Coronado close by. A hop, skip, and a jump from San Diego, Coronado boasts some of the best white sands in the state.

Coronado beaches have a more family vibe in contrast to many of California’s more adult-themed beach scenes. Anchoring Coronado island is the historic Hotel Del Coronado, a late 1880’s-built castle-like structure that oozes plenty of interesting tidbits of history.

There are plenty of eateries and bars to enjoy along the sandy beaches of Coronado. Nothing beats enjoying delicious local fare and sipping on refreshing beverages while enjoying sunrises and sunsets on the Pacific.

Another way to enjoy the beach and check out the island is to take a bike ride amidst the waterfront estates and manicured gardens or take the dog for a walk on the pet-friendly peninsula.

In line with Santa Monica as far as home prices go, Coronado’s median home price is $1,481,600.

The Bottom Line

With an 800-mile coastline flanked by white sands and rocky terrain, California’s Pacific coast offers residents and visitors a seemingly endless array of beaches to enjoy. To help you narrow down your choices of which spot to hit up next, consider any one of the above dreamy locations.

8 Tips For Selling a Unique Home

Selling a cookie-cutter house can be a challenge because you’ve got to go the extra mile to make it unique enough to stand out from the rest. But what about when your home is so unique and quirky that buyers find it downright strange?

A unique property can definitely come with its own set of challenges when it comes to selling. A home that’s unique is one that is unlike any others in the area. Whether it’s the exterior elevation, the interior layout, or the flamboyant fixtures, a unique home can be tough to market successfully.

That said, there are still some things you can do to effectively prep and market your home to make it more attractive to buyers looking in your area. While it may take a little more time to sell, there’s no reason why you can’t find the right buyer who will appreciate the rarity of your home as much as you do.

Here are some tips to marketing and selling a unique home.

1. Hire an Agent Experienced in Selling Unique Properties

First things first: get yourself a seasoned real estate professional. Selling a unique property on your own is highly discouraged, as takes a certain amount of skill and expertise to effectively market the property to attract the right type of buyer. In fact, it’s extremely important to work with an agent regardless of whether or not the home is unique.

2. Understand Your Target Buyer

Unique homes typically attract a much smaller pool of buyers compared to traditional style homes, and as such, it’s critical to identify exactly the type of buyer who would be interested in making on offer on such a property. Once this demographic is identified, the next step is to come up with an effective strategy to market the property specifically to this group of buyers.

Knowing precisely how to reach these buyers is essential, and your real estate agent will know exactly how to target them.

3. Go Crazy With Home Staging

Professional home staging has been known to help homes sell faster and for more money, but this process is even more important when it comes to selling a unique home. Buyers of unique homes are obviously looking for more than just your average home decor, so give it to them.

For instance, adding an element of Feng Shui or “Vastu” can up the ante in your home staging efforts, which are ancient Asian interior design systems that are meant to maximize the flow of energy (“chi”) through careful spatial arrangement and orientation. After all, it doesn’t hurt to have some good energy flowing to make a prospective buyer feel more at home.

4. Throw in Some Lavish Goodies

The design of a unique home already provides some sort of a ‘wow’ factor, so why not continue that trend with some extravagant extras to throw into the deal?

These days, any incentives you can offer buyers can go a long way at the negotiating table. Sellers are topping up their deals with all types of freebies, such as all the furniture, 6-months’ worth of mortgage payments, and even vacations. If you can swing it, throw in an unexpected and highly valuable goodie to entice buyers to take a step closer to putting in an offer and sealing the deal.

5. Use High-Quality Video and Aerial Photography

Having a professional photographer come in and take shots of your home is extremely important to attract buyers. But when it comes to a unique property, you’ve to pull out all the stops. Many homes are unique because of their setting or where they are located, so having an aerial shot of the property and surrounding area can works wonders at highlighting the majesty of the property.

Having a video taken of the property is also very helpful, and in fact, it’s come to be expected from buyers. This is especially true if the unique home is considered a luxury property. In this case, a high-quality video is an absolute must.

6. Make Your Open House a Festive One

Instead of holding an average open house, infuse some energy into it and turn it into a party. Vamp up your open house by having live music, food, wine and spirits, and other elements that go into a festive gala. Advertising a shindig like this will certainly get buyers’ attention and can generate a lot of interest in your home.

7. Give Buyers a Trial Run

While an unconventional tactic when marketing real estate, you may want to be open to allowing buyers who have expressed serious interest in your home to actually spend the night. This will give them the chance to really get a sense of what life would be like for them if they lived in the home. If a certain buyer is on the fence about buying, perhaps spending 24 hours in your home is enough to nudge them in the direction of sealing the deal.

8. Give it Time

It’s important to understand that selling a unique home will almost certainly take longer to sell compared to your average home. With a smaller pool of buyers to depend on, you can expect the property to sit on the market a little longer until the right buyer comes along. Keep that in mind to prevent you from becoming discouraged if the home is not sold as quickly as would have hoped.

The Bottom Line

Selling a unique home is certainly unlike selling a conventional property and definitely calls for some out-of-the-box thinking when it comes to effective marketing. In today’s housing market, it takes a lot more than just planting a For Sale sign on the front lawn and throwing up some photos on the internet to attract the right buyers, especially when your home is unlike any other in the neighborhood. Be sure to hire a real estate professional who is well-versed in the art of selling unique homes and follow their advice in detail.

Outdoor Kitchen Trends in Luxury Homes

Luxury homes are loaded with plenty of over-the-top amenities, but one that has become a staple in these expensive properties are lavish outdoor kitchens. More and more homeowners are spending an increasing amount of time in their kitchens preparing meals and entertaining guests, and outdoor kitchens have simply extended that useful space beyond the interior walls.

From whipping together a gourmet sit-down meal to enjoying a quick and simple wood-fire oven pizza, today’s luxury outdoor kitchen can create the most amazing backyard paradise.

Here are some features of luxury outdoor kitchens that are common among the rich (and often famous).

Variety of Cooking Stations

Forget about just having a solitary barbeque to do all the grilling and cooking. Today’s modern outdoor kitchen offers plenty of options when it comes to preparing various dishes.

Many luxury outdoor kitchens feature not only grills, but also pizza ovens, meat smokers, deep fryers, griddles, and gas cooktops. Many of these pieces come in different designs, including countertop, built-in, and freestanding models that can serve as a piece of art on its own.

Complete Kitchen

The outdoor kitchen spaces that are being designed for today’s luxury homes are not just limiting the features to the cooking station(s). These days, luxury homeowners are asking to have the whole shebang complete with all the frills one would expect an opulent kitchen to have. Many of these outdoor kitchens rival some of the best indoor spaces around.

Cooking appliances, extended countertop space, full-size refrigerators and coolers, built-in barbeques, sinks and faucets, garbage disposals, dining room tables and chairs, and credenzas create a complete kitchen in the backyard. There’s no reason to have to go indoors to prepare and enjoy and meal, nor to have to clean up afterward – it can all be done surrounded by Mother Nature’s best.

Extension of the Living Area

Many homeowners love the idea of seamless flow from their interior space to the outdoors. This is typically done by bordering the indoor and outdoor spaces with floor-to-ceiling windows and glass sliders that lead to an exterior space. An extended roofline often follows to allow family members and guests enjoy the outdoors without being exposed to the elements.

In addition to the outdoor kitchen itself, the exterior space can also be decked out in elements that would typically be found inside. Homeowners are creating outdoor areas that are mirror images of the indoors, including living spaces that accompany the kitchens themselves.

Sofas, recliners, coffee tables, fireplaces, movie theaters, fire pits, lounge seating, and bars are just some of the luxury features that extended outdoor living spaces boast. Add a pergola over top and some ambient lighting and you’ve got the most intimate and comfortable living area that many indoor living areas often lack.         

Ice Machines & Wine Fridges

No need to lug the portable cooler out to keep your favorite beverages cold on a hot day. Today’s modern outdoor kitchens come with built-in ice machines that can keep ice frozen in outdoor temperatures as hot as 115°F. Not only do they store ice cubes, they produce them too.

Complementing these high-end ice machines are wine fridges to help keep your prized Pinot Grigio or Baco Noir chilled to perfection. While wine fridges are nothing new, today’s models are much more innovative and are able to maintain consistent cool temperatures, even if the outside hits as high as 90°F. Older models would have conked out at outside temperatures that high.

Built-In Heaters

The outside temperatures can dip in the evenings during the winter months, especially in northern parts of the state. Built-in heaters can come in really handy during these chilly nights.

Overhead heaters are especially popular, as are heaters along outdoor kitchen walls. Some homeowners are taking things even further by installing heated floors in their outdoor kitchens for the ultimate in coziness.

Draft Beer on Tap

You don’t have to visit your favorite local bar to get a pint of draft brew, nor drag a keg to serve all the guests at your backyard bash. Luxury outdoor kitchens are increasingly being equipped with beer dispensers that serve cold ales on tap. Just stock it with your favorite brands and you’ll be sure to keep yourself and your guests happy.

Wi-Fi Smart Grills

Forget about having to check on the grill every few minutes to check on the temperature. Now there are wi-fi-compatible grills available that allow you to check on your steaks without having to step outside or get off your lounger.

With these wi-fi grills, you’ll have remote access to controls that let you not only keep an eye on the grill temperature and the status of your meat, but you can even fire it up and shut it down all from a handy little app on your smartphone or tablet.

Entertaining Countertop

In addition to the prepping and cooking countertop space, many luxury outdoor kitchens have either extended the countertops or created a separate countertop space specifically for serving dishes or for socializing. Parties most often wind up in the kitchen, so having a separate countertop area specifically for this purpose frees up the sink area for clean-up only.

The Bottom Line

The sky’s the limit when it comes to creating the most luxurious and opulent outdoor kitchen spaces. For homeowners who have no issue with their budget, there are seemingly endless ways to put a lavish spin on their outdoor kitchens to match their equally opulent interiors.

Tips on Making the Most of Your Fall Listing

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We’re officially smack dab in the middle of the fall season and are inching closer and closer to the holidays. While you’re busy making your list of ingredients for your holiday dinner and running around picking up gifts for your loved ones, there are plenty of things that need to be done if you’re planning to sell during this season.

Prepping your home for the market is always a critical component to a successful sale, but there are things you can do to tweak your home and it’s listing to cater specifically to autumn selling.

Gauge Your Market

While this suggestion is not necessarily dedicated solely for fall listings, it’s a critical one to mention nonetheless. Before you put your home up for sale in the fall, it’s imperative that you understand the current market in your area before you determine a listing price and come up with an appropriate marketing strategy.

Your real estate professional will be able to guide you through the listing and pricing process and will have their finger on the pulse of the local market in your area. From there, an appropriate listing price and marketing plan will be devised to ensure the right pool of buyers are targeted and a sale is made in a reasonable amount of time.

Make Any Necessary Repairs

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Before you even list your home on the market, be sure to take some time to make any repairs that you’ve been putting off until now. As a homeowner, there are plenty of components that require regular maintenance throughout the year, such as changing the HVAC filters, cleaning the ducts, clearing out the gutters, and so forth. If you haven’t managed to stay on top of these, now’s the time to pay a little attention to them.

Make sure all the home’s major systems and appliances are in good working order. If not, you’ll need a professional to come in and bring them back up to par. Fix any leaky faucets, chipped tiles, and burned out light bulbs. Make sure your pool and/or hot tub are functioning properly and the water has been cleared of any debris.

Tend to Your Home’s Exterior

You’ve probably been too busy enjoying the summer holidays to bother spending too much time and effort tending to your home’s landscaping. Sure, you may have cut the grass and watered the flower beds, but what about the bushes, hedges, and trees? It’s highly likely that these could use a little trimming to keep them looking neat and tidy.

Once you’ve done that, take a look at your gutters to see if they’re clogged with leaves and other debris. If so, give them a good cleaning to make sure they don’t end up creating a water dam that could wind up causing water damage to your home. Rake all those leaves off the lawn, weed the grass, get rid of any loose sticks and twigs, and clear out the front yard of any garbage, kids’ toys, or any other items that should be tucked away.

Decorate With Autumn Accents and Colors

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One of the best parts about the fall season is the bold, vibrant colors that are associated with it. Brilliant reds, vibrant yellows, and bright oranges can make any space look beautiful and feel welcoming, so be sure to embrace these hues when decorating and staging your home for the autumn market. Infuse these colors in flowers, throw pillows, candles, door wreaths, tablecloths, and any other accent piece you can think of.

Use Seasonal Aromas

Some people may be turned off by the potent aroma of scented candles, like vanilla or coconut. But for the fall months, you might be able to get away with some scented candles of the season. Stick to candles that bring in the aromas of sweet juniper trees, cinnamon spice, and warm apple pie.

If you want to go with something more natural, consider leaving cinnamon sticks in jars in various spots around your home, as well as clementines decorated in cloves for a fresh and pleasant scent that will easily waft throughout your home’s interior.

Lighten Up Your Home

As we near the end of the calendar year, the days continue to get shorter and shorter. With fewer daylight hours comes a lot more darkness, which doesn’t always fare well for a home that’s listed on the market.

What you want to do during this time of year is brighten up your home as much as you can. Open all the drapes, turn on all the lights, and use spotlights both inside and out. Don’t leave your home in darkness, and instead make good use of lights to make your home feel welcoming and showcase some of the best features of your home.

Extend Your Marketing Reach

Marketing to local buyers should always be part of a prudent marketing strategy, but you don’t have to limit yourself there. Consider broadening your reach of prospective buyers by targeting out-of-towners who may be looking to relocate to your neck of the woods.

Put together marketing materials that highlight all the great things about your area and your home to get as many eyes on your property as possible throughout the season before Christmas arrives.

Consider a Flexible Closing

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Many buyers may want to close on a deal and move into their new home before the holiday season hits, so consider whether or not a fast closing is doable for you and your family.

On the other hand, some buyers may want to wait until well after the holiday season dies down before making a major move, even though they’ve decided to start house hunting early on. Either way, being flexible with your closing date can open the doors for you if it’s something that you can comfortably work out.

The Bottom Line

The fall can be a fantastic time to sell a home, as long as the proper measures are taken. At the end of the day, anything you can do to improve the look of your home and solidify a sound listing and marketing strategy can boost the odds of selling your home quickly and at the price point you’re aiming for.

The Most Expensive Home Purchase on the Records in L.A. This Year Goes to Beyoncé and Jay-Z

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For the past few months, pop queen Beyoncé and her rapper-mogul husband Jay-Z have been on the hunt for the perfect abode to all home in L.A., and it looks like they’ve finally found it.

In true Beyoncé and Jay-Z style, the power couple not only purchased an incredibly expansive and lavish compound in the uber-opulent posh East Gate area of Bel Air, but one that takes the top spot as the priciest residential real estate deal in Los Angeles so far in 2017 and the 6th highest price ever paid for a single-family residence in Los Angeles County.

The title was previously held by L.A. Dodgers’ owner Mark Walter who purchased David Geffen’s Malibu estate on Carbon Beach. The home traded hands at a whopping $85 million this past May.

It was initially reported that the house hunters made a $120 million dollar offer on the steep $135 million asking price, but ended up making an off-market deal for a much lower amount. According to public records, the multiple-winning Grammy winners are carrying an incredible $52.8 million mortgage on the home.

The mammoth 30,000-square-foot expanse is comprised of six glass-walled buildings tucked behind iron gates and perched on about two acres of hilly terrain. Designed by well-renowned architect Paul McLean, the home boasts 8 bedrooms and 11 bathrooms, providing plenty of space for the couple and their growing family as well as a slew of overnight guests.

Accessed through a set of glass-paneled doors is a massive 10,000-square-foot outdoor living area complete with a basketball court, several patios and terraces, a 15-car garage, and not one, but four infinity-edge swimming pools, one of which is rooftop.

There are plenty of water features throughout the compound as well as a set of floating trees near the entrance, making for a grand approach to the majestic home. All the outdoor steps that lead to the compound’s various levels are decked out in noble travertine marble.

Anchoring the three-story main house is a stellar circular staircase adorned in customs stairs and dark-brown leather, which looks more like a piece of art than a structural component. The home is perfect for indoor-outdoor living at its finest thanks to all the floor-to-ceiling glass-paneled windows (which are bullet-proof, no less) that offer amazing views of the surrounding greenery and the city in the distance.

Inside the home are soaring 30- to 40-foot ceilings, contributing to the grandiose feel of the entire space. The property is also the ultimate ‘smart home’ thanks to just about every feature being operated by remote.

The spacious kitchen is lined with custom-made cabinets that were imported from Italy and features two gargantuas islands and top-of-the-line Miele appliances. Each one of the home’s custom-designed 11 bathrooms is unique and laid out with Gessi faucets and convenient toilets that flush, open, and close without having to be touched at all.

Given Queen Bey’s never-ending wardrobe, the songstress has her own enormous walk-in closet to house her constantly growing clothing and shoe collection. Jay-Z has his own walk-in closet too, but his wife’s easily overshadows his and rivals the size of the average apartment in NYC.

Other notable features of the home include a spa and fitness/wellness center with 12-person whirlpool, media room, gaming room, separate staff quarters, and even a helipad for convenient getaways without having to fight the L.A. traffic or the lurking paparazzi.

For an astounding $88 million, expect nothing less than the best for this star-studded A-game couple.

What Buyers Should Know About the Earnest Money Deposit

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When buying a home, your offer price shouldn’t be the only dollar figure to concern yourself with. There’s also the earnest money deposit that you need to seriously consider.

An earnest money deposit serves to benefit both the buyer and the seller. From the buyer’s perspective, offering a handsome deposit in the form of a money order or certified cheque shows sellers that they’re serious about buying and are financially qualified to make a purchase. This, in turn, puts buyers in a more competitive position and pushes them one step forward towards a successful deal.

For sellers, an earnest money deposit offers protection should the buyer fall through on the deal for whatever reason. If the buyer breaches the contract, the seller may be able to retain the money from the deposit as a means of collecting on damages. Earnest money deposits basically reassure sellers that they have something financial to fall back on if the buyer causes the deal to fizzle out.

With all that being said, there are some things about the earnest money deposit that all buyers should fully understand before cutting that check. After all, it’s a sizeable amount of money to part with.

How Much Should You Offer?

The answer to this question will ultimately come down to the temperature of the current market in your area and what the seller is demanding. Having said that, it’s typical to offer about 3% of the purchase price.

In lukewarm markets where homes aren’t being sold very quickly, you can expect to put down a deposit even a little lower than 3%, while buyers may offer even more in a sizzling market. If you find yourself in the middle of a bidding war, you can use your earnest money deposit as leverage to make the seller notice you. The higher the deposit amount in this situation, the better.

Some sellers may not want to work with percentages. In this case, they may ask for set amounts instead. Don’t forget that your deposit amount goes towards your down payment, which you’ll have to pay anyway.

When Do You Pay the Deposit?

The average real estate deal typically requires the buyer to submit their deposit check shortly after the offer has been accepted. If you’re dealing with a hot market, it’s suggested that you provide your earnest money deposit along with the signed contract.

Who Keeps That Money Until Closing?

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Your deposit check will not be given directly to the seller, for obvious reasons. Instead, your money is kept by the title company or in a professional escrow account. At no time are brokers permitted to deposit any earnest monies into their own business accounts. That said, it’s important to ask for a receipt for the earnest money you supply as a deposit.

You may also be entitled to collect interest on these funds. Anything over the amount of $5,000 may qualify, but you will have to fill out IRS Form W-9 if you want the interest money.

What Happens if the Deal Falls Through?

Not all real estate deals successfully close. Sometimes issues arise that may cause the deal to fall through. As long as there are contingencies included in the contract that provide you with the opportunity to back out of the deal, there should be no reason not to get your earnest money deposit back.

For instance, typical contingencies for financing and home inspections allow buyers to back out of a deal and get their deposit back should they be unable to fulfill them before their respective expiry dates. That’s the whole point of including contingencies in a real estate contract, and you’d be well advised to put them in before you sign off.

But if the closing date comes and goes and you’re still unable to close the deal, the seller may come after you for damages. In this case, they’ll try to retain your earnest money deposit as a means of financial protection.

In many cases, buyers are held liable for their inability to follow through with the deal and their earnest money deposit is not considered the sellers to keep. That said, there is a limit to how much the seller can take from you.

If a Liquidated Damages clause is included in the real estate contract, no more than 3% of the agreed-upon purchase price can be kept by the seller, even if you fail to complete the purchase. That’s why it’s typical for the earnest money deposit to be around the 3% mark in California.

The reason behind liquidated damages is to set forth provisions about how damages are to be dealt with should the deal fall through. It can be tough to predict actual damages that can happen if a contract is breached, so both parties agree to limit any damages to the earnest money deposit if they sign off on this clause.

It’s a good idea to ensure that the purchase agreement covers how the refund of the deposit money is handled and to consult with a real estate lawyer if a breach of contract occurs and your funds are on the line.

The Bottom Line

When you’re talking about thousands of dollars being handed over at the time of contract signing, you’ll certainly want to fully understand how your earnest money deposit is handled. Make sure you’re in-the-know about these funds and the role they play in a real estate deal before determining how much to offer and handing it over.

Since every transaction is unique, coming up with the appropriate strategy necessitates a thorough understanding of market conditions in your area. Before making your decision about how much to offer for your earnest money deposit, be sure you speak with your Realtor.