Is there a required amount that the deposit be under a purchase and sale agreement?

There is no required amount.  However, there are customs.  In the city the deposit is generally 10% of the amount of the purchase price.  In the suburbs it is generally around 5%.  There is nothing cast in stone, however, with respect to the amount of the deposit.  Depending upon how much you are financing, a smaller deposit may in fact be appropriate in the circumstances.  It depends on the expectation of the seller.  For instance, if the seller figures that the buyer is going to be a first-time home buyer, it would be expected that a smaller deposit would be required since the first-time home buyer will probably get financing which will finance a good portion of the purchase price.  However, if the property is, let us say, being sold in the Back Bay the seller would expect the buyer to have substantial net worth and a 10% deposit would probably be expected by the seller.  The objective of the buyer is to get the seller to accept an offer with the smallest amount of a deposit that the buyer anticipates that the seller may accept which is to be paid at the time of the purchase and sale agreement. 

The important thing to remember about the deposit is, virtually in all instances,  that it will become liquidated damages in the event you do not buy the property – not because of an inspection or mortgage financing – but because you simply change your mind, you lose your job, or an adverse health issue comes up.  The amount that you put down on a purchase and sale agreement will be forfeited to the seller if you refuse to go forward without a proper reason under the purchase and sale agreement.

If you have questions about this or any other real estate matter, please contact Tom Bennett at (617) 531-6574 or tvb@barronstad.com.