When you put an offer on a home, you'd want to do everything you can to make your bid more competitive. One way to do this is through earnest money. But what is it, exactly? And how much do you need?

Since providing earnest money deposits is an essential part of the home buying process, here's what you should know about them.

Earnest money is an upfront deposit that a buyer makes when planning to purchase a home, showing that they're making a serious offer. It’s also called a “good faith deposit” because the buyer is proving to the seller that they have every intention of buying the property if their conditions are met.

When a buyer and seller enter into a purchase agreement, the seller takes the home off the market while the transaction moves through the entire process to closing. Having earnest money keeps the buyer committed to moving forward with the home purchase while also giving the seller enough confidence and insurance to stop accepting new offers. 

It’s important to remember that earnest money is different from the down payment. This deposit is usually cashed and held in a neutral third-party, such as the title company’s trust account or the broker’s escrow company account, for safe-keeping until the purchase agreement is either completed or terminated.

An earnest money deposit isn't required, as there are no laws stating that home offers must have money attached to them. But it’s a common practice and even a necessity, especially if you’re shopping for a home in a competitive market. Sellers are likely to favor an offer that includes an earnest money commitment as it provides them extra assurance. If it’s a seller’s market and you’re going up against multiple offers, you might be better off submitting an offer with earnest money attached.

While there are no set amounts, most home buyers offer between one percent to three percent of the home's sale price. The amount you’ll deposit as earnest money will also depend on factors such as the current market, the local policies and limitations in your state, what's customary in your market, or even what the seller requires. You can deposit more if you want to make your offer stand out, or offer less if you’re in a buyer’s market. 

Work with a knowledgeable real estate agent to help you understand how much earnest money to offer. If you plan to purchase a home in a neighborhood where cash offers and bidding wars are common, they may recommend a higher good faith deposit as you could risk losing the home to the one with a stronger offer. But if it's a slow or moderate market, a good faith deposit in the standard range may suffice.

Your earnest money deposit will stay in the escrow account until you officially close on the home. Assuming that the deal goes smoothly, the deposit is then applied to your down payment or closing costs. Essentially, you're just putting up some of the money upfront. 

For some loans that don't require a down payment, such as VA and USDA loans, the earnest money will be applied directly to closing costs. If the earnest money deposit is more than the closing costs, the buyer can get the remainder back.

But what if the deal falls through and you're unable to close on the home, will you get your earnest money back? It depends on how the purchase agreement is written. Your contract includes contingencies that spell out when the earnest money is refundable and when it becomes nonrefundable, as well as how the refund is handled.

If you include contingencies with your offer, you’ll get the earnest money back if a contingency isn’t met. For example, if you’ve included a home inspection contingency in your offer and the home inspection reveals structural damage or severe defects, you may choose to cancel the home purchase and your earnest money deposit will be refunded. Additionally, if a financing contingency is included in the contract and your financing falls through because of appraisal or approval issues, you’ll get your money back. 

But if you break the contract without cause, back out of the deal for a reason not listed in any of the contingencies, or simply change your mind about the purchase, the seller might be able to keep your earnest money. You may also lose your earnest money if you cancel the deal after your contingencies have passed their expiration dates.

Earnest money deposits can mean several thousand dollars—a huge sum that can be put towards other aspects of your homeownership dream. This is why it's important to take steps to protect your money. The best way is to talk to your real estate agent about ways to safeguard your deposit, and have them walk you through the entire purchase contract before you sign anything. Other things you can do to protect your earnest money include:

• Using an escrow account: Never give funds directly to a home seller, or wire the money to the real estate brokerage, attorney or title company without first confirming the wire instructions have been sent from a legitimate source. When the funds are deposited, make sure you get a receipt.
• Understanding the terms of your contingencies: Again, your agent or real estate attorney can explain all contingencies and what your obligations are as the buyer, as well as the best way to waive a contingency if that’s the right strategy. Make sure you know your end of the bargain and in what circumstances you would keep or forfeit the earnest money.
• Staying on top of deadlines: The contract will likely include a timeline of when things need to be done, such as the inspection or loan approval. If you miss a deadline, the seller might claim you’re in breach of contract, which means they could terminate the agreement and keep your earnest money deposit.

Gary Nelson

Delegated Associate Broker

Realty Executives of Flagstaff

928-600-4279

www.GaryNelsonGroup.com

2022 AZ Realtor of the Year

https://www.garynelsongroup.com/blog/2024/3/12/what-is-an-earnest-money-deposit-a-guide-for-buyers-and-seller

Yes, Flagstaff, Arizona is a popular location for Olympic athletes to train. Flagstaff’s high altitude and mild climate make it an ideal location for athletes to train and prepare for international competitions, including the Olympics. The city has a number of training facilities, including the High Altitude Train Center, which is located at Northern Arizona University.

Several Olympians from a variety of sports have trained in Flagstaff, including marathoner Deena Kastor, long-distance runner Bernard Lagat, and cyclist Kristin Armstrong. The U.S. Olympic marathon team has also held training camps in Flagstaff, and the city has hosted a number of Olympic Trials events, including the 2020 U.S. Olympic Marathon Trials.

Now it’s drawing international athletes as they begin training for the 2024 Paris Summer Olympics.

NAU’s pool has been packed with swimmers from across the world, including Germany, Australia, China, and Hector Pardoe from the United Kingdom. He is competing in Paris this summer as an open-water swimmer in his second Olympics.

Pardoe is one of the many Olympians in Flagstaff training at 7,000 feet for weeks. However, going from sea level to 7,000 feet has its challenges. Altitude training can be an uncomfortable adjustment, but when athletes return to close to sea level, they can really shine.

What makes Flagstaff the ideal training destination?

In a nutshell, successful training camps are often about the big picture rather than any one thing. This means a combination of elements, rather than any one particular element. In Flagstaff, you have an incredibly unique combination of training camp components that make it, in terms of an altitude training site, second to none anywhere in the world:

• Physiologically ideal altitude of 7,000 feet where the desired physiological adaptations from altitude training (increases in erythropoietin production, red blood cell mass, total blood volume to move oxygen more efficiently through the bloodstream, etc.) can occur.
• Very high-quality training venues (sprinkled around the city and centered around Northern Arizona University).
• World-class performance-related services (courtesy of HYPO2 and its experienced high-performance management team).
• World-class extracurricular activities and diversions (such as the Grand Canyon) that attract millions from all over the world.
• All the advantages that come with being based in an actual city at altitude (such as restaurants, museums, observatories, Route 66 attractions, etc.), rather than training in other, typically remote altitude training sites. 
• Extremely strong sport culture, in which athletes achieve easy integration into a city that is used to seeing and supporting elite athletes in training.

International athletes and visitors also enjoy coming to northern Arizona for the sights and activities the area offers, including Sunset Crater, Wupatki National Monument, the Grand Canyon, Sedona, and many more. Just one more reason that it’s great to be in Flagstaff!

Next time you’re in downtown Flagstaff, stop by our office to learn more about the area, and the housing market! We always have a real live Realtor® on duty in the office during office hours to answer any questions you may have.

The NAR Settlement: Here’s the Truth and How it Affects You.

1. The settlement forces brokers to reduce their compensation. FALSE

The settlement in no way establishes a standard or limitation on Realtors for what they may charge, nor services they elect to deliver. Those fees have always been negotiable and there has never been any collective bargaining. In every market, there is a wide variety of fees, just as there are levels of marketing, service and competence.

2. The settlement will, for the first time, allow sellers to no longer pay compensation for an agent bringing the buyer. FALSE.

There has never been an obligation for a seller to pay buyer agent compensation, yet it is a practice that’s worked well. A past rule requiring an offer of some amount of compensation was a rule of display on a Realtor-owned MLS, yet it could have been as low as $1. That limitation was removed and today the MLS accepts all listings, regardless of buyer agent consideration.

3. The settlement prohibits sellers from paying a commission to a buyer’s agent and relieves sellers of the financial burden. FALSE.

The mandate restricts buyer agent compensation from displaying on association-owned MLS, yet the practice can’t be restricted in any other form of marketing. Sellers may still elect to pay buyer agent compensation to differentiate their properties. While sellers can elect not to pay buyer agent compensation, that doesn’t mean they will avoid the economics as buyers may write into any offer a contingency requiring the seller to cover the cost or request other concessions.

4. The settlement will serve to meaningfully lower prices and make homeownership affordable again. FALSE.

Values in real estate are determined by supply and demand. Fees in a real estate transaction represent additional expenses, yet these include not only commissions but many other related charges. Should real estate commissions be reduced by 1% because of compression, that $500,000 home will now cost $495,000. Do you think the seller now believes the home is worth less and will happily give the difference to the buyer? The reason home ownership is increasingly less affordable is that homes in our market have significantly risen in value these last few years.

5. The settlement is a win for buyers who will now be able to negotiate the fee for representation. QUESTIONABLE.

For readers who have purchased homes, it is more than likely you were happy to have the seller compensate your agent so you didn’t have to. For buyers who had to provide the down payment and closing expenses, having the commission paid by the seller and incorporated in the home price allowed them to finance the amount over time instead of coming up with additional cash at closing, which in turn could allow them to afford a higher priced home. Most buyers do not have cash in their hand to pay an agent directly, so the sale process is used for that. Only about 30% of sales are cash or with buyers able to pay an agent directly.

6. The settlement will result in significant restitution to consumers who were “harmed” over recent years in their transactions by Realtors. FALSE.

The settlement is huge, yet when one divides the amount by the number of potentially qualifying consumers it works out to about $10 per person.

7. My commitment to providing you with the best possible real estate experience will not change. TRUE.

I was born and raised in this community and have been a real estate professional for over 30 years. The NAR settlement does not change my determination to provide professional, top-notch service to buyers and sellers I represent.

I have had the privilege of working with numerous clients in what is likely their largest investment. I enjoy going above and beyond to help buyers realize their dreams and sellers maximize their returns, and making the process a positive experience for them.

As the 2^nd generation Broker/Owner of Realty Executives of Flagstaff, the oldest brokerage in Northern Arizona, I have seen many changes in the industry. Our brokerage has always adapted to the best way to represent buyers and sellers whenever there is a shift in the environment. And we will continue to do so.

Wayne McCormick

Broker Owner   

Wayne@WayneMcCormick.com
Realty Executives of Flagstaff

http://www.realtyexecutivesflagstaff.com

15 E. Cherry Ave. "Historical Downtown"

Flagstaff, AZ  86001

Phone: (928) 773-9300

Direct Line: (928) 526-9300

Nestled along the picturesque landscape of northern Arizona just outside of Flagstaff, the Red Mountain Trail beckons adventurers and nature enthusiasts alike to immerse themselves in its awe-inspiring beauty. Located at milepost 247 off US-180 this hidden gem offers a captivating journey through ancient volcanic terrain and panoramic vistas that will leave you spellbound. This 2.7 mile out-and-back trail is considered an easy hike with a gradual incline into the amphitheater-shaped center of an erupted volcano. It begins with a gradual uphill climb through a field of scattered junipers and piñon pines. For the most part, you’ll be surrounded by open country, which allows for some wonderful panoramic views of the San Francisco Peaks to the northeast, as well as Red Mountain right in front of you.

A Trail of Geological Marvels

According to the U.S. Geological Survey, Red Mountain is one of several hundred cinder cones within a large volcanic field that stretches from Williams to the canyon of the Little Colorado River. What’s unusual about Red Mountain, which rises 1,000 feet above the surrounding landscape, is that its internal structure is exposed — like a massive geode that’s been cracked in half. This one-of-a-kind trail takes you into that core, an area known as the amphitheater. Erosional pillars called “hoodoos” decorate the amphitheater, and many dark mineral crystals erode out of its walls. Studies by the U.S. Geological Survey (USGS) and Northern Arizona University scientists suggest that Red Mountain formed in eruptions about 740,000 years ago.

Spectacular Scenery and Wildlife

One of the highlights of the Red Mountain Trail is its stunning scenery, which showcases the diverse beauty of the Arizona wilderness. Along the way, you'll be treated to panoramic views of the San Francisco Peaks, lush ponderosa pine forests, and expansive meadows teeming with wildlife. Keep an eye out for native flora and fauna, including wildflowers, birds, and small mammals that call this pristine landscape home. The last half-mile of the hike follows a normally dry streambed. The trail leads to unique black lava formations and red rocks, with a ladder at the end to get hikers up an approximately 6 foot rise. If you look down at the sand, you’ll see thousands, even millions, of black shiny granules, some of which are as big as golf balls. These granules are often mistaken for “Apache tears,” which are composed of obsidian, the volcanic glass that was highly valued by ancient cultures for crafting arrowheads, knives, scrapers and other tools. But don’t be fooled. What you’re actually seeing are the crystals of minerals (pyroxene and amphibole) eroded from the volcano. Once you get into the amphitheater, take a closer look at the walls and you’ll see more of these minerals embedded in the cinders. Eventually, they’ll be plucked out by water and wind erosion. Light plays hide and seek among the spires and hoodoos, and so can you. Be watchful as you scramble up these formations -- most are a lot easier going up than down!

Cultural Heritage and Indigenous Connections

The areas surrounding the Red Mountain Trail hold significant cultural importance for indigenous communities, particularly the Hopi Tribe. For generations, the Hopi people have revered the land as sacred, honoring its spiritual significance and ancestral connections. As you hike through this ancient landscape, take a moment to reflect on the rich cultural heritage of the region and the enduring legacy of the indigenous peoples who have called it home for centuries.

Tips for Trail Exploration

• Trailhead Access: The Red Mountain Trail is located at milepost 247 off US-180, approximately 18 miles northwest of Flagstaff. Look for designated parking areas and trailhead markers to access the trail.
• Trail Conditions: While the trail is generally well-maintained, it's essential to be prepared for variable terrain and weather conditions. Wear sturdy hiking shoes, dress in layers, and carry plenty of water and snacks for the journey. Trees in the natural amphitheater provide some shade.
• Leave No Trace: Help preserve the natural beauty of the Red Mountain Trail by practicing Leave No Trace principles. Pack out any trash, stay on designated trails, and avoid disturbing wildlife or vegetation.

The Red Mountain Trail at milepost 247 off US-180 near Flagstaff, Arizona, offers a captivating journey through ancient volcanic landscapes and breathtaking vistas. Whether you're seeking adventure, solitude, or a deeper connection to the natural world, this hidden gem promises an unforgettable experience that will leave you inspired and rejuvenated. So, lace up your hiking boots, grab your camera, and embark on a memorable journey to discover the wonders of the Red Mountain Trail for yourself. As you look around, remind yourself that you’re actually standing inside an ancient volcano. It’s a rare opportunity.

And when you're passing through historic downtown Flagstaff, stop into our building for a map and local information on the area and the housing market!

Realty Executives of Flagstaff

15 E. Cherry Ave., Flagstaff, AZ  86001

928-773-9300