Tuesday, August 23, 2022 / by Sonya Reiselt
Whether you’re a first-time home buyer or not, it’s important to understand the home buying process. When you’ve decided to purchase a home it’s a very exciting time. You’ve secured your pre-approval from the bank and know how much you can spend overall for the total purchase of your home. You’ve also saved for your down payment and the earnest money you will give to the seller at the time you sign the offer contract for the home.
What exactly is Earnest Money? Earnest money is essentially a good faith deposit and is generally 1-5% of the home's purchase price. This money is held in an escrow account, normally by the company that is listing the property for sale. This can vary however and be held by a designated attorney, escrow company or title company. The reason for the earnest money is to show good faith in that the home buyer will hold up to their end of the contract and protect the seller.
What would cause a home buyer to lose their Earnest Money?
If a buyer decides they just no longer want a property (buyer’s remorse- it happens) and is one of the main reasons for the earnest money. If a buyer walks away for no reason, a seller can & most likely will, keep the earnest money.
If a buyer does not adhere to contractual dates within the contract. There is a Due Diligence period within the contract whereby the buyer needs to have contingencies completed- most often the home inspections and mortgage contingencies (unless it is an all-cash sale). If the buyer does not have these completed by the dates specified and does not ask for an extension before the end of the contracted date. The contingencies will then expire. The buyers could then lose their earnest money.
If there is ever an issue with earnest money, it will always come down to whoever DID NOT follow their contractual obligations. Therefore it is critical to always have and work with an experienced real estate professional when buying and selling real estate.
Do you have questions of the home selling and buying process? I’d be happy to sit down with you and answer those questions. It can be overwhelming when you’re unsure. Please feel free to give me a call at 843-321-2158 or email me at firstname.lastname@example.org