Paying Earnest Money
Earnest money is a pre-payment to your down payment. Earnest money shows the seller that you are serious about your offer & have some skin in the game!
The earnest money deposits will be held in a non-interest-bearing account by a third party; either the seller’s agent, seller’s attorney, or your attorney.
You will make 2 earnest money deposits: the initial earnest money deposit & the final earnest money deposit.
Initial Earnest Money
You will pay your initial earnest money within 2 business days after you go under contract. The initial earnest money deposit is refundable and can be returned to you during the “attorney review” period, while attorneys are coming to terms on the contract and inspection items.
Final Earnest Money
Once attorney review concludes, you will turn in your final earnest money deposit. Both deposits will be non-refundable at this time, though you are still protected by your mortgage contingency and condo document review contingency.
Paying Earnest Money
Your method of payment depends on which office is holding the earnest money. You may be able to electronically pay, wire, or deliver a paper check.
With wires, ALWAYS call the receiving office (i.e. whoever the funds are being held by) to verify the wiring instructions, as wire fraud is a risk.
If you are mailing a paper check, please take a photo of the check before you send it, & send it with tracking to ensure it arrives! Provide the photo & tracking number to your Transaction Coordinator so they can track it as well.
Refunding Earnest Money
You may have a situation where you need to cancel the contract. In that case, here are general situations where you may or may not be refunded your earnest money.
Buyer typically can be refunded earnest money:
- Buyer cancels contract during attorney review and/or inspection period, disapproving the contract and/or condition of the property
- Buyer cannot obtain mortgage due to
- Major change in buyer’s financial circumstances (e.g., job loss)
- Low appraisal/appraisal issues
- Lender cannot approve the condo building/association
- Essentially, any good faith reason the lender cites
- Buyer requests mortgage extension & seller denies
- Buyer cancels contract during condo review period, disapproving the condo documents
Buyer typically cannot be refunded earnest money:
- Buyer cancels contract AFTER the attorney review & inspection periods have concluded without citing any contingencies (e.g., mortgage contingency, condo review contingency)
Please note that this is not a clear cut process & we often find ourselves in grey areas. The release of any earnest money deposit requires the signatures of BOTH the buyer & the seller. Therefore, when in doubt, you should seek counsel from us & your attorney.
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