WHERE DOES MY EARNEST MONEY GO? When buying a home
An earnest money is the deposit often made by buyers toward the purchase of a home as a demonstration of the seriousness or willingness to complete the purchase. However, the question that is often asked by people, especially those buying homes for the first time, is: where does the earnest money go? This answer to this question is simple. Upon a mutually accepted offer between the buyer and seller, the earnest money is deposited into a trust account of an escrow company. The deposit is a credit to the buyer and becomes part of the purchase expense. In order to allay your fear, I will briefly explain the professional process involved in the transaction.
What is the process?
The rule governing the real estate industry requires that you make a commitment in terms of money when you show interest in a home. This is an expression of your seriousness in buying the home. The amount payable as earnest money varies enormously. It depends on factors, such as: policies and limitations in your location, the current real estate market, and what is required by the seller. On the average, however, it is expected that you pay 1-2% of the total purchase price of the home.
When do you make the deposit?
The earnest money is payable once the seller has accepted your offer and the both of you have signed a contract. As a professional real estate agent, I will be there to guide you through the entire process so that your interest can be safeguard.
Where does the earnest money go?
Your Earnest Money Deposit (EMD) does not go into thin air. When you make the deposit, the money is held by a third-party escrow company in accordance with the terms of the executed purchase contract. Home offers are made in contingency. It could be in contingency of period for appraisal, loan approval, property inspection or approval of HOA documents. What happens to your earnest money at the end of the day would depend on the outcome of such contingency. If the home contract is eventually completed, the earnest money will be released by the escrow company and be credited as down payment and/or closing costs for you. If the transaction did not go through, the earnest money deposit will be refunded back to you.
Who are the people that should not keep your earnest money?
- The listing real estate agent should not keep your earnest money as there may be a conflict of interest
- It may be too risky to keep your earnest money with the seller.
- Your earnest money should also not be in your agent’s account
In order to avoid losing your earnest money to the wrong hands, it should be deposited into a trust account of an escrow company, who will stand between you and the seller.
Who hands-over the earnest money?
It is your realtor who will manage the whole transaction on your behalf. You can give the earnest money to your realtor as at the time when the offer letter is being prepared. Once the offer is mutually accepted by you and the seller, the realtor will have to deposit the earnest money into the escrow company’s trust account within four (4) calendar days. Cash payment is not advisable when paying your earnest money since such medium may not have documentation backing. It is best to make the payment using a cashier’s check, wire transfer, or personal check.
If you live in any of the cities in Coachella Valley and you’re interested in buying a home in the neighborhood, you can contact me for a most reliable professional real estate advice.
What is the next step?
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