Contract Deposit vs. Down Payment in NYC Real Estate: What's the Difference?

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What’s the difference between a contract deposit and a down payment in NYC real estate? We’ll demystify this topic in the following video.

I’m Nick at Hauseit, a reduced commission platform for buyers and sellers based here in New York City. Check out our website www.hauseit.com to learn about ways to save money when buying and selling real estate here in NYC. Now let’s get started!

So, you’re most likely familiar with a down payment. You put down, say 20%, and the bank loans you the remaining 80%. You put down, say 5%, and the bank loans you the remaining 95%.

In New York City, the most common down payment is between 10% and 20%. Co-op apartments in particular typically require at least 20% down, and in some cases perhaps 25% or even 35% or more. Some condo buildings also have minimum down payment requirements, but it’s more rare. So if you’re buying a condo or a house, there’s most likely no minimum down payment requirement aside from, of course, having your lender’s approval and permission from the seller.

Keep in mind that a seller gets to choose who to sell their property to, and in a multiple offer situation, a seller will likely gravitate towards the offer with a higher percentage down. So please don’t automatically assume that a seller will be okay with less than 10% down just because your lender is.

So what’s a contract deposit? Well, in New York, a buyer typically makes a deposit of roughly 10% of the purchase price when signing a contract on a property. This contract deposit is held in an escrow account by the seller’s attorney. If you default on the purchase contract, the seller gets to keep the 10% contract deposit.

So if you’re making a down payment of 10% and the contract deposit is also 10%, well, you won’t have to bring any additional down payment funds to the closing table. This is because the contract deposit is the same as the down payment.

Now, what if you’re putting down 20%? If the contract deposit is 10%, this means that you only have to bring 10% of the purchase price to the closing table, in addition to closing costs.

So in short: a contract deposit is made when you sign a purchase contract. A contract deposit in New York and NYC is typically 10%, although this is technically negotiable. If the size of your down payment is more than the customary 10% contract deposit, you have to bring the remaining funds to the closing table. But if your down payment is 10% and the contract deposit is 10%, it means that you’ve already deposited the necessary funds for the down payment. So at closing, all you need to worry about is having money for closing costs.

So there you have it. We hope you found this video helpful, and if you did, please do us a favor and like this video and subscribe to our channel. We’d greatly appreciate it. I’m Nick at Hauseit, and we’ll see you on the next video!

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NYC Buyer Closing Cost Calculator: https://www.hauseit.com/closing-cost-calculator-for-buyer-nyc/
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