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.

OK, so you’ve looked through MLS Listings, and real estate ads, and gone to the open-houses and have done a thourough search, and you have finally found the home you want to buy. So what happens next?

I’ll tell you how it went with me…

My real estate agent (who was simply fantastic) sat down with me and took notes about everything I was looking for in a home. She insisted that nothing was too trivial, after all, this is one of the most major decisions you will make in your life… That night she e-mailed me MLS listings for about 96 houses available in the area I wanted to look in.

I went through that list and sent her back a much shorter list of homes I was interested in seeing, based solely off of the listings. We then began visiting the homes. At each ones I would take notes on the pros and cons, and I would write down any questions I had so my agent could hunt down the answers. After looking at a lot of houses I finally found my dream home, I knew it was the place I wanted to bid on, that’s when the REAL nitty-gritty of Real Estate begins.

The First thing we did was to go back to her office and look at what they were asking, and discuss what a reasonable offer would be. This would be the amount we deliniated in the bid contract, which in and of itself wound up being nearly 50 pages! Aside from the offer, this contract also specifies how much (if anything) you want the seller to pay towards closing, how much you want them to cover in repairs (if needed), or that you accept the house “as is”. This is also the point at which you pay your “binder fee” (more on that later). Then we sent the bid-contract over to the selling agent. This is when the lengthy negotiation process began.  This seemed to continue for days, tweaking the details here and there. Once both parties had reached an offer we could agree on, we began the closing process.

For me the closing process involved all of the following:

• I received a copy of the selling agent’s home inspection
• I arranged to have my own home inspection done, and my own WDO (Wood Destroying Organism) inspection done. Both of these were completed by the same inspector on the same day. He was VERY thorough.
• My bank arranged to have the home appraisal completed (you will get a copy of the appraisal at or after closing)
• My bank had me sign some final paperwork, lock in my final interest rate and sent my package off to “Underwriting”. Underwriting took longer than anything else in this process.