Earnest Money Deposit
If you are planning on purchasing a home there are expenses that you need to know about in the beginning. Expenses you can expect to pay depending on your specific transaction can range from hundreds to thousands of dollars.
You can choose not to pay for a home inspection or radon test. However, it is rare that you will be able to place an offer on a home without an EARNEST MONEY DEPOSIT (some times called a Good Faith Deposit). When making an offer on a home a buyer will place an agreed upon amount of money in the hands of an agreed upon third party who holds the money until the ratification of the contract. After ratification the third party will deposit the money in an account and hold until settlement.
If the deal is never ratified (accepted by both sides) then the money will go back to the purchaser. If it is ratified and falls through before settlement the money will be handled in accordance to the contract. It is possible depending on where the deal is, that the purchaser will get the money back with no issues. If all of the contingencies of the contract are removed and the purchaser defaults and does not go to settlement then the purchaser may forfeit the money depending on the contract and state laws.
If the deal goes to settlement the money will be forwarded to the settlement company to assist with the closing costs.
If you are looking for more information read this article.
It is not my intent to give legal advice. You should speak with an attorney if you need more information on the earnest money deposit. Each state may different laws and contracts in how the deposit should be handled.
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Closing Cost… Spend It Or Loose It!
Johathan,
Good article on Earnest Money. I’ll be watching for you on CNN!
Best Wishes,
Sue Brown
Prescott Real Estate Round Up
Great job! It is funny how different the laws are in each state. Texas works a bit differently yet earnest money is also most often needed to purchase.