Aug 26, 2016
Many first-time home buyers – and often reoccurring home buyers—are unaware of the earnest money deposit when purchasing a home. The earnest money deposit is when a potential buyer puts money down as a deposit for the future purchase of the home. After writing a contract and the seller accepting, this deposit will be put into an escrow account – often a title company – that will keep the funds until it’s time for them to be released. This deposit is an important part of the home buying process, as it lets the seller know that the buyer is serious about wanting to purchase the property.
If within the contract, there are stated contingencies (conditions included with the offer of a home that must be fulfilled before the deal can close) the earnest money can be returned to the purchaser if the following circumstances take place:
If the buyer, however, decides against purchasing the home without the aforementioned contingences in place, they can forfeit their earnest money – or perhaps be subject to a lawsuit by the seller for specific performance. If a buyer walks away, rarely does the forfeited earnest money cover the seller’s damages caused by having to re-list and sell the property.
The larger amount of earnest money placed in an escrow account, the stronger the contract, and therefore, more attractive to the seller and could possibly result in a lower sale price for the purchaser. Another benefit of putting down a large percentage of earnest money is to win out other potential buyers. If you’re in competition with another buyer on the same property, at times putting a larger earnest money deposit down can help win a bidding war.
Earnest money is a great benefit for both buyers and sellers, as it assures the seller a buyer is seriously invested in purchasing their home, and it can give the buyer some leverage if there may be more than one offer on a property.
Led by third-generation owner Stafford Manion, Gladys Manion, Inc. is a boutique agency specializing in luxury St. Louis real estate along the central corridor.