Hey Vern It's Earnest Money
It’s all very exciting to go look at homes with all your lists and desires and hopes. Sitting down to write an offer is a triply exciting moment because there is a new home in sight and soon it may be yours. Then you sit down and confront five to six pages of words strung together in ways that seem daunting and maybe even incomprehensible which are constructed to give protection to buyers, sellers, brokers, and agents and to become instructions to all parties should the offer be accepted and these pages become a contract.
Daunting indeed and perhaps the most blank stare inducing moment is when a real estate agents asks “Do you understand about Earnest Money?” Very few people understand the whys and wherefores of earnest money. So in an effort to help you be an informed buyer, (because knowledge is always a good thing) here is a brief presentation on earnest money.
Earnest money is a sum of money put forth by a buyer to indicate that he or she is a serious buyer and has serious intent towards the home they are writing an offer on. This money will be applied to buyers costs at closing and will be forfeit should terms of the contract not be met. This money will be held in a non-interest bearing account by either a Broker or the Title Company. Once it is in this account it cannot be released unless the home is sold under terms of the contract, both parties agree in writing to release monies, or a court order. The important part is both parties agree in writing to release funds. Both parties. If for some reason the buyer wants out of the contract sellers cannot assume they will receive earnest money as both parties need to sign a release saying the buyer forfeits earnest money. The same applies to a buyer who expects a return of earnest money. Both parties must sign such an agreement.
How can buyer get earnest money back? In most cases there are two contingencies written into a contract. The first is home inspection. If the buyer and seller cannot come to agreement on any repairs after the home inspection, buyer may terminate contract and a mutual release will be signed. The other is financing. If a buyer cannot obtain financing then a mutual release must be signed and monies will be returned. That’s it. There are no other exceptions.
Also earnest money is not required. It is a negotiated item. It is highly likely if a buyer does not offer earnest money the seller counter with requirement for earnest money. The amount is again a matter of negotiation. Serious stuff this earnest money.
I am a Realtor working with Prudential Lucien. My wife Cindy and I have lived in Lakewood since 2004. A former hige end Pastry Chef and College Teacher, I have lived many lives. Both Cindy and I are involved with Lakewood Alive, Live Well Lakewood and The Lakewood Historical Society. We live on Waterbury road with two cats and you can usually find us sitting on our front porch come evening.