As a Buyer, How much Earnest Money Deposit can I Pay?
The thumb rule often used is that a buyer can confidently
pay up to 2% of the offer price as earnest money deposit,
but not more.
Third Party Escrow
The earnest money deposit is usually to be placed in to
an escrow account. The money will be there in the escrow
till closing. During that time the buyer and seller can
jointly control the money. Once the deal is closed, the
earnest money deposit is added to buyer’s down payments.
What If I Decide Not to Buy the Home?
For one reason or other you may decide not to buy that home.
In that case what happens to the earnest money deposit that
is in escrow? Here is where the seller and you, the buyer
may disagree. The seller may wish that the money in escrow
is to be paid to them. But, you, the buyer, as you have
not made any purchase would want the money back. So, how
is it resolved?
Since money is held in a third party escrow, you and the
seller should come to a mutual agreement. Then only the
funds in the escrow can be released. Once mutual agreement
between you and the seller is reached the funds are released
from the third party escrow to the buyer, subject to any
deductions for any cancellation fees, etc.
Earnest money deposit in escrow can be released only when
both parties come to an agreement or when an order is issued
by the court of law. Generally parties try to come to terms
with each other as it is less time consuming and a less
costly alternative than going to court and fighting it out
legally.
In certain states, after a stipulated time period if no
release authorization is received from the parties, the
earnest money deposit in the escrow is returned to the buyer.
Tips to the Buyer
Sometimes problems may arise with the inspections or title
search. A buyer should include such conditions in the sales
contract upon which the earnest money deposit will be returned
to them.
And it is always wise not to give the earnest money deposit
to the seller before the deal is closed.
How to Make Your
First Profitable Real Estate Deal in Less Than 60 Days. ClickBank pays you 50% when you sell this
publishers product. More details at: Real
Estate Deal
