Buying a home is an exciting process. The idea of carving out your own piece of land to call your own is appealing to many. Fortunately, the buying process is generally trouble-free. However, there are still instances when things don't go as planned, particularly when it comes to earnest money and a seller's unwillingness to return it. In this instance, knowing how to avoid this type of problem is important.
What Is Earnest Money?
Once you find a property that you like, it's important to express an interest. One option is to make an offer; however, if you're serious about your interest, you make an earnest money deposit. Earnest money is basically a financial transaction between the buyer and the seller to express commitment.
The transaction shows the commitment on the seller's part to purchase the property, and it also serves as a portion of the down payment on the home. State limitations, the value of the property, and the owner's discretion are all considered when it comes to establishing how much earnest money is required.
When the Deal Goes South
In the event that your interest in buying the home doesn't prove successful, it's important to understand that you are entitled to all or a large portion of your earnest money deposit. In some instances, the seller is entitled to a cancellation fee that is deducted from the deposit. There are a number of things you can do to ensure this money is returned to you.
Purchase agreement – Always make certain that you are preparing a legally binding purchase agreement before you pay your deposit. This agreement should be prepared by a legal professional to ensure that it is all-encompassing. This agreement will clearly outline the details concerning the return of your deposit and more importantly, it will require that both you and the seller agree on these terms before the money is dispersed.
Establish a holder – Make certain that the terms of your deposit don't involve the seller holding the deposit. Your deposit should be held by the real estate broker overseeing the transaction or the title company. Even after you have decided on one of these options, it's still helpful to have your real estate attorney look over the transaction to ensure the funds have properly been deposited into an escrow account.
When it comes to protecting your earnest money deposit, your attorney and proper planning will prove vital. Make certain you are putting forth an effort to keep your hard-earned money protected.