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Real Estate Glossary Definitions A-G Definitions H-N Definitions O-Z Other Definitions				THE 'EARNEST MONEY' DEPOSIT Most offers to buy a house are accompanied by a check. This check is generally referred to as the "earnest money deposit." The basic reason for the deposit is to impress the seller that the buyer "earnestly" intends to purchase the property. The amount of the deposit varies from purchase to purchase, depending on a variety of factors. If a property generates a lot of interest, a buyer may make a larger deposit to convince the seller that their offer is stronger than the others. During "hot" markets, deposits are generally larger than during slow markets. In normal times, buyers should hesitate before making a deposit that is larger than two percent of the purchase price. Underwriting guidelines sometimes require strict documentation of such deposits. A buyer may often be required to show a bank statement just prior to the date of the check, plus evidence that the check actually cleared the bank. If you're closing quickly, this might require a trip to the teller window at your bank. There are reasons to try and keep the deposit as small as possible, but not so small that the seller doesn't take it seriously. You see, once a buyer and seller agree to terms, the earnest money deposit is usually placed in a "trust" account. At that point it is no longer the buyer's money -- it belongs jointly to the buyer and seller. Almost all deals close and the earnest money funds are applied to the buyer's down payment and closing costs. As the saying goes, however -- there are exceptions to the rule. Some sellers think that if the deal falls through, the earnest money deposit is automatically forfeit. Some buyers think that if the deal doesn't close, they automatically get the money back. Neither one is true. Even when the failure to close is the buyer's fault, the seller doesn't have a "right" to the deposit as a way to "punish" the buyer. Nor does the buyer automatically get the entire deposit back, even when they are not at fault. First, there are normally a small amount of cancellation fees that must be paid. These fees are collected from the deposit. Second, since the deposit is held in trust, both the buyer and seller must agree on the disposition of the funds. This is a quirk of law in most states and the real estate agents and their companies have no control over the situation. If something goes wrong very early in the deal, the seller normally understands and the deposit is usually returned to the buyer without a fuss. When things go awry later in the transaction, both parties usually exercise common sense and negotiate a fair solution. In a few rare occurrences, the buyer and seller find it difficult to agree. The point is that is always makes sense to reach an agreement. Failure to agree ties the money up for awhile, could possibly lead to further legal action and inconvenience, and it just becomes a frustrating mess for both sides -- more so than you realize at the time. Serious problems are the exception, not the rule. Most "challenges" are routine to a qualified professional real estate agent. The situation may be new to you, but the agent may have dealt with it many times in the past.

Our Platinum Selection

Five of today's top-rated properties...

Single Family Home, Blue Mountain, Nova Scotia, Canada		Canada
What a find! This home is over 3000 square feet on 6 acres of land with frontage on the Salmontail River. Hardwood and ceramic floors throughout, custom kitchen cabinets, spacious double decks, five large bedrooms, three bathrooms, and a circular driveway. A place for everyone in the family in this ... Bedrooms: 5 - Location: Waterfront		CAD169,900.00 (USD133,969.41)

Bed and Breakfast, Andalusia, Malaga, Spain		Spain
... Bedrooms: 8 - Location: Coastal		EUR1,400,000.00 (USD1,761,227.83)

Detached House, Pescara, Abruzzo, Italy		Italy
This single property is ready to move into and has been recently decorated throughout. There are two separate entrances on the ground floor, one leads into a hallway and off this is a good sized bathroom with a four-piece suite including a shower cubicle and there is a room which could be used as a ... Bedrooms: 2 - Location: Inland		USD350,000.00 (USD350,000.00)

Farmhouse, Loreto Aprutino, Abruzzo, Italy		Italy
Characteristic stone farmhouse of about 450 sqm, completly restored with about 12 hectares of land. The property is in a very good location and with excellent panoramic view.... Bedrooms: 0 - Location: Inland		USD959,500.00 (USD959,500.00)

Detached House, Frammersbach, Bavaria, Germany		Germany
House for sale in the beautiful Spessart Forest of Germany in the village of Frammersbach, centrally located in Germany & Europe - 1hr drive from Frankfurt. The building was built with high quality, 1994. It has three apts (2-3 bdr – 2 bath & 1-2 bdr 1bath). 2 rented & 1 occupied by owner, returnin... Bedrooms: 9 - Location: Inland		USD575,000.00 (USD575,000.00)


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THE 'EARNEST MONEY' DEPOSIT