| When a Buyer submits an offer
to a Seller, it most often contains an Earnest Money payment.
This payment shows good faith that the Buyer is serious.
The higher the amount, the stronger the offer. The money
is held in an escrow account and held until the transaction is
completed, usually at closing. At closing it is a credit
for the Buyer applied toward the purchase. If the Buyer
defaults on the contract, the earnest money can be claimed by
the Seller for damages suffered from taking the home off the
market. The Buyer may take back the Earnest
Money if the contract allows them to under stipulations such as
during the due diligence period, when the Buyer terminates
agreement due to change of mind or any other reason.
Another way the Buyer can get back the Earnest Money is if they
have a Financing Contingency period and they get declined by the
Lender and provide that decline letter before the contingency
period ends. It is important to follow time limits of
contingencies and due diligence periods, for if they expire, it
is too late to cancel and get the Earnest Money back. If
the Buyer does not extend these periods and then tries to cancel
outside of period, the buyer is in default and may not get the
earnest money back. The Seller then may obtain it.
The Buyer also gets the earnest money back if the Seller
defaults. |
