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Earnest Money
What is it, and what is it all about?
Before any document or agreement can become a legal and binding contract, for
both sides, there has to be consideration. Something must be offered as evidence
and proof that an agreement is more than just a person’s word to buy. Earnest
money is that consideration. The more money you put down, the more earnest you
are displaying to the seller that you indeed want to buy his/her home.
But how much shows good earnest?
An excellent question with no black and white answer. All real estate
transactions are individual circumstances and situations and require different
approaches. This is one of the many reasons you want to be professionally
represented by Bart Cloninger, when it comes time to negotiate a contract. But,
as a general rule, earnest money usually falls within 1% to 5% of the purchase
price.
When do I need to pay this?
You place earnest money at the time of an offer in either check or money order.
I take this check with me when I present your offer, but I keep the check in my
possession. If your purchase is subject to the acceptance of an inspection, the
check can be deposited after you have accepted the inspection in some cases, but
is usually deposited within 24 hours of and accepted offer.
What happens to my earnest money and how is it used?
Earnest money will go into a trust account held by a third party (usually my
office’s trust account). This way neither seller nor buyer has access to it
and it can be legally considered earnest consideration to buy property.
Eventually, as we move toward closing, My Company will submit this money to the
escrow closer and it will be applied toward down payment and or closing costs.
What happens if someone defaults? Do I get my money back?
This can be a very complex or complicated question to answer, depending on the
situation. Once again, here is why you need professional representation, to look
out for your interests. While this question can become to deep to answer in a
simple sentence, I will tell you that the general rule is that if a buyer backs
out for no legitimate reason, the seller would get the earnest money. The
reverse holds true if the seller backs out for no legitimate reason. Then the
buyer is refunded the money. I can explain earnest money in further detail to
you when we are together, but this is the basic purpose or intent of what
earnest money was designed to do.
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(509)
981-1001