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The additional earnest money given by the buyer to the seller or to escrow under a purchase agreement. The additional deposit is usually tendered within a short period of time after acceptance of the offer. If a broker is able to obtain only a small initial deposit, he or she should attempt to get an additional deposit that brings the total deposit up to 5 to 10 percent of the purchase price. Otherwise, there may not be enough money to pay some of the costs (title policy, commission, escrow fees, attorney fees, and so on) if the buyer defaults. For example, the buyer might deposit $1,000 with her offer to purchase the seller’s $50,000 condominium unit and agree to pay an additional deposit of $4,000 within five working days after the seller’s acceptance. If the buyer breaches the contract, the seller may elect to keep all deposit money, including the additional deposit, as damages.
If the buyer is late in making the additional deposit payment, the seller may be able to terminate the contract if a court holds that failure to make timely payment is a material breach. One way for the seller to ensure this result is to make the seller’s acceptance conditioned upon timely payment of the additional deposit.
Dearborn Real Estate Education
This "Word of the day" is excerpted from The Language of Real Estate, 6th Edition by John Reilly (published by Dearborn Real Estate Education, 2006 copyright). To purchase the complete book, with over 2800 key terms and definitions, or to browse through Dearborn's hundreds of other professional real estate titles, including Real Estate Technology Guide by Klein, Barnett, Reilly, click here.
  

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