All Forum Posts by: Taj Akinbode

They are not the same. 

You're correct that to avoid PMI for most loans, you'll typically need at least 20 percent of the purchase price set aside for a down payment. But you need to have this conversation with your lender, not the seller.

What I was referring to above in terms of option fee and earnest money deposit is that these are two of the important $dollar figures that goes on your offer.  An Option Fee is a fee paid to the seller by the buyer (within 72 hours of an executed contract here in TX) and with this payment you're buying the right to terminate the contract without reason or cause for a given period of time while you do your due diligence such as ordering an inspection, etc. The option fee is usually not a large amount unless you're in a hot market. I have submitted offer with $100 for 10 days before (essentially $10/day) and I have put $5000 option fee for 5 days($1000/day) in my seller client's pocket in a competitive deal. So option fee is negotiable depending on how competitive you want your offer to be

Earnest money on the other hand is typically 1-3% of the sales price (also negotiable) and when you submit this payment, it shows the seller that you are serious about your intent to purchase. 

Christin, There's definitely a lot of benefits to using an experienced realtor who can negotiate hard on your behalf. However, Since you're not going that route, one of the tools you can use to negotiate is an inspection report, but most of the time, you can't get the chance to negotiate hard without having a skin in the game. You do this by putting in an offer first along with depositing option fee and earnest money. Once these are done, you can order an inspection ASAP and use the necessary repairs identified in the report as a means to negotiate and win some concessions from the seller. The only thing you will sacrifice is the option fee. You're going to lose that money if you pull out of the deal. Don't make it too large.