Individual state laws and real estate regulations control the use of earnest money in day-to-day real estate transactions. Those who are involved in real estate transactions need to know the state rules very well regarding the earnest money. Especially the failed transaction with dispute.
DC Fawcett is well known in the real estate market. He can tell you about real estate earnest money.
Facts about real estate earnest money
Here are the facts about real estate earnest money.
Earnest money is a deposit that the buyer makes to the seller, thereby gaining the seller’s trust in a transaction. It is very often used in real estate transactions and allows the buyer to take extra time while seeking finance. For both, buyer and the seller hold the earnest money in a trust or escrow account.
The escrow account shows the seller about buyer’s genuine interest in buying the property. Once the transaction gets through, it is treated as a down payment. If the transaction falls through, the buyer may not be able to claim for the deposit. However, the seller cancels the deal. The buyer will get back the deposit amount.
If the buyer is unable to purchase the property as per the agreement. The third party like real estate agent or the title company holds the money. Till it is closed where it is applied to the cost price.
In some states, the seller is entitled to keep the earnest money on breach of contract. The seller can also force the buyer to purchase the property if the latter checks the box.
Earnest Money – Advantages
Good Faith deposit
When the buyer and the seller enter the contract, the earnest money deposit will set the offer for you among other applicants. VA loan process approves the loan.
If the buyer issues the check as earnest money check, it means that he/she is a genuine buyer. It helps the seller to get the attention they are worth. A solid contract between both the parties supplemented with earnest deposit. Shows that both the parties have the resources and interest to sign the deal. If the buyer builds up a good relationship with the seller by means of showing good will, with sufficient deposit, they will be in a good position to negotiate more favorable terms.
Buyers will lose their earnest money if they falter on a real estate transaction. It gives a financial guarantee to the seller that the buyer will not withdraw from the contract without any genuine reason.
The earnest money differs depending on the area you live. To determine the local customs of the state, the best thing is to converse with an experienced real estate agent and negotiate with them. The price on the particular property depends on the market competitiveness and other market oriented factors.
Escrow money works out only if the buyer and the seller are authentic.
If the house cannot pass the inspection, the buyer can walk out of the contract with the refund. This is a disadvantage to the seller.