Setting Roots

The binder, or binder fee is a “good faith” fee that you pay when you make your bid. A binder is typically at least $500, but can technically be any amount. The more you offer, the more serious the buyer knows you are.

The binder can benefit you, because it comes off the final price of the house at closing. So if you are offering $200,000 and pay a $1000 binder fee at bid time, you will only owe $199,000 at closing.  Now like I said, the point of the binder fee is to demonstrate that you are serious about your offer. So once you pay the fee, if you back out (with a few exceptions), the seller gets to keep the fee.

So When Does the Seller Keep the Binder, and When Do I Keep It?

To put it in a very simple form, the seller gets to keep the fee if you back out of the bid for any non-legit reason, basically if you just change your mind for no good reason, or get a “bad feeling“, they get to keep the fee. If you back out because they misrepresented the home in someway, or because the home inspection finds major flaws that they are either unwilling to fix, or you deem are beyond what you are willing to accept, you can back out and get all or some of the binder back. Be sure to read your bid contract carefully, and make sure you understand everything you are signing.

Like I said, this is a very simple explanation, and I am in no way a legal expert, or a contract lawyer. If you have any questions about the details of the bid, and what the terms are, feel free to ask your agent before you sign, or have a lawyer take a look at the contract before you sign it.