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Finance Real Estate How a Simple Addendum Can Save You From Losing Your Earnest Money Deposit
Finance Real Estate How a Simple Addendum Can Save You From Losing Your Earnest Money Deposit
| How a Simple Addendum Can Save You From Losing Your Earnest Money Deposit |
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| Written by Jay Seville |
| Sunday, 03 April 2011 10:01 |
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Hi I'm Jay Seville, the owner of JustNewListings.com Realty and I wanted to cover with you a really interesting and dramatic subject today and that is earnest money deposits. The acronym for that would EMD for short and it brings a number of issues to the table and especially from a buyer-agent's perspective. How to protect your client? How to protect their money from being trapped and in limbo if there's a disagreement between the purchaser and the seller etc. What can you do? And if you're the buyer, how can you educate your own agent on these matters since probably one in a thousand are doing anything to protect you and your earnest money Deposit which is a sad state of affairs. I'll just leave it at that. A common scenario is that you're going to buy a home for $250,000 and soon after ratifying the contract will deposit $5000 in an escrow account with your broker. This earnest money deposit gives you skin in the game; it is a motivation for you to not default on your contract leaving the seller high and dry as that would cause you to lose some or all of your earnest money. The best selling agents (typically referred to now as buyer agents) will try to keep their clients' earnest money deposit as low as possible to minimize their risks. If there are no competing offers on the table or expected then one might as well try to keep their deposit as small as possible. Life can be crazy and you can expect the unexpected....So what if you want to void the contract within one of the contingency windows such as the home inspection? You are within your contractual rights to void without default yet can you get your earnest money just handed back to you the following day? Is it that simple? Well I wish it was that simple because as a broker, as the owner of JustNewListings.com Realty, it would make my life easier occasionally. What happens is if you want to void the contract, even if you are within your very plainly stated contractual language. If you are supposed to be getting your EMD back, the managing broker of the office where your money is being held, he cannot at least in most states, everything is completely regional. You have to check with your own broker with whom you're working. But the broker cannot just release the earnest money deposit back to the buyer who is supposed to be getting it in so many scenarios. The real estate broker's hands are tied; he cannot refund the earnest money until he gets signatures from all parties--the buyer, seller, listing broker and selling broker (buyer agent side). A release of deposit form delineates to whom and how much of the earnest money deposit is to be released. For example if the deposit was $10,000 the buyer and his broker would insert the entire amount to be released to the buyer. Usually that happens without drama inside 48 hours. Sometimes though it is much more complicated and the seller demands a portion of the EMD such as $2500 or $5000. When this happens the broker is handcuffed practically and cannot refund the buyer his rightful money. If the seller will not sign the release sending the money back to the buyer, then the buyer's broker must send notice in a letter to the seller stating he is going to release the funds back to the buyer in 30 days unless he (buyer's broker) receives a written protest disputing that release from the broker to the buyer. If the seller does make this dispute within that 30 day window the buyer's broker will not be able to release funds. The courts will take it from there likely in most regions. So the earnest money would be held against the buyer's will in this situation when the seller will either not sign the release or even goes so far as to dispute the release in writing within the 30 day window. The frustration would be high as this could prevent the buyer from making an offer another home until they recovered their funds from the deposit. How can one prevent the potentially dramatic scenario of a disputed earnest money deposit from rearing its ugly head? Much of the potential is simply prevented with an addendum to the contract up front that says all parties agree that the earnest money will not be deposited until the all parties have signed the home inspection addendum. The parties simply agree up front that no money is to be deposited until the buyer and seller have negotiated their home inspection issues and signed the ensuing addendum. At that point the money will be deposited. This is common sense and the time from ratification to completing the negotiating of the home inspection is about a week. Those negotiations can create friction or anger that could lend itself to a seller not agreeing to sign off on releasing the earnest money immediately if it had been deposited up front before the home inspection even occurred as it usually is. About the Author: The home buying process is often tied to school district and the values of neighborhoods rises and falls accordingly. Whether you are looking for Woodson High School homes for sale or West Springfield High school homes for sale, work with a consumer advocate to protect your financial interests when buying a home. Kindly provided by LJ-Marketing.dk You are welcome to use this article on your own website, if you include the link just before this text. |
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