Skrepka,

In New York (especially the boroughs & Long Island,) like NO OTHER PLACE ON THE PLANET...........

5-20% of the purchase price UP FRONT IN CASH... is often what is demanded by sellers.

Don't ask me why... I think it is insane from all angles;
A) Sellers eliminate their size of buyer pool,
B) The smaller buyer pool IS NOT compensated by a sufficient increase in closing certainty.

Just nuts... that's all I can say.

Luck!
Dave Donhoff
Strategic Equity & Leverage Planner

Dave,

unfortunately, what you are saying is exactly what I have heard. Every realtor we talked to, have said 10%.

I just don't get it. Eventhough we are prepaired to put down 20% downpayment, I am not prepaired to shell out $50K of my money before I even know if the deal will go though (i.e. inspections, timing, etc.).

I am seriously freaking out about it.

Do you think there is a chance I can make an offer with maybe 2% earnest money and have it accepted?

Yes, there is always a chance, Skrepka. Many parts of LI are suffering from a downturn in the market. The longer a property has been up for sale, the more willing a seller may be to accommodate a buyer.

I am in NYS (the other end of the state) and when our seller's Realtor requested earnest money of almost 10% (to cover the the cost of the Realtor commission + true earnest money, as explained to us by our RE attorney), our attorney had it knocked down to $10K. The sellers agreed. We were in a hot seller's market at the time.

So, regardless of what is customary, if the seller really wants a sale, this is negotiable.

This doesn't sound right...when we bought our house on LI in 2003 I recall putting down $500 earnest money and the remainder of the down payment on signing the contract.

Incidentally, where on LI are you looking? We're about to put our house on the market. :-)

You are correct - 10% earnest money is the norm for this area.

You certainly might try to offer less, but it may potentially weaken your offering position.

My house is currently on the market and I would NOT accept less than 10% downpayment at contract signing. If a prospective buyer couldn't come up with 10%, I would be very suspicious that they could complete the sale.

That's my two cents - take it or leave it.

Hi Spy,

My house is currently on the market and I would NOT accept less than 10% downpayment at contract signing. If a prospective buyer couldn't come up with 10%, I would be very suspicious that they could complete the sale.

At first blush, this seems really silly (given what I see nationwide.)

At second glance, I want to ask "WHY" do you feel this way?

Is it New York culture, above all other U.S. markets, for buyers to break contracts?

Seriously curious,
Dave Donhoff
Strategic Equity & Leverage Planner

I've never been in a market like yours so take this for FWIW. But look at Laura22 as an example - I would certainly try. But to improve your chances you could prepare by doing your homework - if your credit is stellar and your 20% is firm and your financial institution/loan is rock solid - i.e. yes this deal will go through as long as you want it to - line those ducks up baby and make sure SURE your Realtor communicates that effectively to the buyer's realtor when you negotiate that lower earnest money.
This is one of the major things about using realtors that makes me queasy. You know that junior high game where the message gets passed around the circle and ends up totally different? You have 4 people in your chain and making sure the message is received properly is important if you have the financial goods. Especially if both realtors think its perfectly normal and acceptable to put up 10%, its human nature not to consider a lower number as seriously. But its the buyer on the other end that counts. JMHO.

FWIW, when we bought in NYC in '87, 10% was the norm. Prior to that, we looked on LI...10% was the norm there as well.

Also, on LI, we would have been required to put one year of property taxes up front in escrow. That I found to be extremely annoying.

We bought in NYC, new constrution that was tax abated..and even though we had to put 1 year in escrow, the amount was so low due to the abatement, it was a non-issue.

That said, you will need to use an attorney for the transaction, so consult with one now to make sure you are geting the correct info.

Skrepka, your post is a little confusing to me because you say "can I make my offer with 2%" and then you say, Im not prepared to shell out $50,000 before inspections etc. If you are talking about a earnest money to "make an offer" (sometimes called a binder, and also not done in all areas of NY anymore)you can make the offer with as little as $1000. If you are talking about what you put down at the signing of the contract, this would be after you are relatively sure you are proceeding because it happens "after" you do the inspections. I dont know how different things are in LI, im a little north of that, but people still buy homes with no money down, or $10,000 at contract, etc. It doesnt always have to be a percentage. Its all negotiable. It is all what the seller is willing to accept and in a market that is sluggish, they are more open. Where it really makes a difference is when you are in a bidding war, then it might be viewed as strength in the buyers ability to close. (ridiculous, but true)

In my area the earnest money is around 1% of the purchase price. To imply that the amount of earnest money determines the financial qualifications of the buyer are ridiculous, it's the downpayment amount that is more important.