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In most real estate transactions, when you submit an offer on a piece of property, you’ll be required to put up earnest money. These funds serve as a “good faith” deposit that you’re serious about buying the property and have the financial wherewithal to follow through and purchase it. This earnest money gives the seller some protection for taking the property off the market while the appraisal, inspection, and financing are pending.
Amount Of Earnest Money
The amount of earnest money is typically set by the seller, but can be negotiable. If you’re in a really competitive real estate market (one with cash offers and bidding wars), you might consider offering a higher amount of earnest money.
Where Does Earnest Money Go
When you give earnest money, the funds don’t go to the seller – instead, they’re placed in an escrow account.
When Can A Buyer Get Back Earnest Money
If you’re a buyer, you can get back your earnest money when the real estate purchase successfully closes. You can either take the cash back, apply it to closing costs, or include it as part of your down payment.
If you decide NOT to purchase the property, you can still get your earnest money back under certain circumstances. Common reasons for buyers getting back earnest money, without buying the property include:
•the seller didn’t meet the timelines or deadlines in the real estate contract
•the appraisal for the property came in below the sales price
•you decide to back out after an inspection
•your financing doesn’t come through
•you weren’t able to sell another property in time to close on the new property
Note, however, that any condition or contingency for getting your earnest money back will be based on the original language that was included in the contract. For example, if you didn’t have an inspection contingency in your real estate contract, then you can’t get your earnest money back because of issues that cropped up in the inspection.
When Can A Seller Keep Earnest Money
In general, if you’re a seller, you’ll get to keep the buyer’s earnest money if you’ve met all of the contingencies, deadlines, and timelines in the contract, but the buyer backs out of the sale.
In most cases (again, this depends on the language in the real estate contract), you’ll be able to keep the earnest money, but the buyer will be able to get out of the contract without further penalty.
We’re Here For You – Experienced Real Estate Attorneys
If you have a dispute over earnest money or any other aspect of a real estate contract, we can review your real estate contract and let you know your options.
See related topics:
Inspection Contingency – Real Estate Sales Contract
Financing Contingency – Real Estate Sales Contract
Appraisal Contingency – Real Estate Contract
Title Contingency – Real Estate Contract
Property Sale Contingency – Real Estate Contract
At Timely Contract, we have local real estate attorneys who have experience throughout Idaho, including: Boise, Post Falls, Coeur d’Alene, Lewiston, Moscow, and Sandpoint.
We also have local real estate attorneys who have experience throughout Montana, including: Missoula, Billings, Bozeman, and Kalispell.
And we have local real estate attorneys who have experience throughout Washington, including: Spokane, Spokane Valley, Liberty Lake, Medical Lake, and Chene