Disclosure: this post about Earnest money deposit is not to be construed as legal advice. If you have questions, it is best to consult with an attorney.
Earnest money deposit or an Earnest Payment
To show that an offer is serious and made in good faith, it’s traditional for the prospective home buyer to accompany it with a check for a negotiated amount — often a percentage of the purchase price — known as an “earnest money” Bear in mind,while there are market “norms” for Earnest money deposit amounts. It is always a negotiation.
In an ideal world, if you found your dream, you and the owner consummate the deal with a handshake and, later, your down payment. In the real world, in order to prove your offer to purchase a property is “earnest,” or “in good faith,” you need to put down a Earnest money deposit.
If the deal goes ahead as planned, the Earnest money deposit is normally applied toward your down payment.
When Do You Pay the Earnest Money Deposit, and Who Holds It?
In most cases, after your offer is accepted and you sign the purchase agreement, you give your earnest money deposit (or within a predetermined and agreed to date from the date of acceptance) to the title company. In some states, the real estate broker holds the deposit. Steelbridge Realty does not hold Earnest money deposit.
After turning over the Earnest money deposit , the funds are held in an escrow account until the sale is in the final stages. Once everything is ready, the funds are released from escrow and applied to your balance on the contract or down-payment.
There are ways to safeguard the return of your deposit with contingencies in the contract. Those are best approached on a client by client as well as a deal by deal approach (with competent legal help involved as always). From our experience every client and real estate deal is different.
Steelbridge Realty LLC is a Licensed Real Estate Brokerage that utilizes cutting edge marketing techniques and data driven Real Estate solutions in today’s ever changing environment.
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