Home Buying and Earnest Money |
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By: Barbara Samuson Posted: 2010-08-10 07:53:57 |
| If you want to buy a home, then you have probably heard the term "earnest money" at least once. This money is the initial step for a home offer, something the seller considers important to the sale. It lets the seller know how serious you are about the purchase and that you do not wish to back out of the deal.Earnest money is not the down-payment, so do not confuse the two. The down-payment is usually a set amount given after an offer has been accepted, and it is based on the sale value of the home. Earnest money is more of an initial show of interest, letting the seller know how serious you are about the home purchase. While some people are $5,000 serious, others might be $500 serious. It depends wholly on buyer intuition, and this money is always returned if the offer is rejected.Of course, the seller will look closely at each offer, often times choosing between "serious offers" based upon the amount of earnest money presented. But under no circumstances should that money be given directly to the seller. After all, any initial interest money will be forfeited if you pull out of the home deal, unless of course you have stipulated contingencies for which the deal can be made void. If you do need to pull out, you don't want the money to already be in someone else's bank account, because then you might never see it again.The money should be placed into an escrow account or given to the title company for safe keeping. Make sure that this company doesn't automatically cash the check, as this will cause a huge delay if the sale falls through and you need that money back. It is better if they just hold the check until the offer is accepted or rejected.To protect yourself further, make sure that you include both contingencies and a liquidated damages clause in your contract. Contingencies are the "what ifs" of the real estate world, declaring that if something specified goes wrong, the purchaser is allowed to back out of the deal and get their down payment back. Some of these "what ifs" might include obtaining financing, remaining employed, or passing the home inspection.The next step, a "liquidated damages" clause, is also important. It means that, if you must default for a reason not listed in your contingencies, the seller can ask nothing more from you than you have already given. In other words, this will ensure that you only lose your deposit and can't be sued for additional damages or forced to purchase the home.And there you have it. If you are careful in your contracts and use your earnest money wisely, you will soon have the home of your dreams.For more information about earnest money options, Valencia real estate demands, or finding a great Santa Clarita realtor, Barbara Samuson can offer you many suggestions for additional resources. |
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