In buying or selling a home, buyers and sellers might be confused because of all the different new terminology used. Sellers don’t remember the terminologies and need refreshment and a first time buyer might need a dictionary to help them.
What is Earnest Money?
When a buyer offers to purchase a home, the offer usually includes Earnest Money.
Earnest Money is to demonstrates to the seller that you are serious and interested in buying the home.
Many agents would say that “Earnest Money is one percent of the offer price of the home”, I would say that it is negotiable and depends on how interested you are in the house. I had a buyer who offered 25% earnest money to show how interested he is in the property. In Texas, earnest money is usually paid to the title company within 2 days of the executed contract. (Executed contract is when buyer and seller have the contract signed by both parties)
Buyers are always wondering what will happen to the money in case they decided to buy or not to buy.
In case, buyers decided to continue with the contract and buy the house, the earnest money will be used as paid amount towards the price of the house (as it is part of the downpayment) and you will be able to see it on the HUD statement at closing.
In case, buyers decided to terminate the contract, it will depend on the terms of the contract. For example, when you make the offer, you request an option period of 10 days (A negotiable period of time that can be 7 to 10 days of the execution date). If you terminate the contract in day 5, you can get your money back. If you terminate the contract in day 11, you will lose your money.
It is very important to have a Realtor helping you in the process to explain the details in the contract and do the negotiation part for you and make your real estate transaction as smooth as possible.
I am a real estate professional representing buyers and sellers, my job is to do the best of your interest.
For more information, contact Jimmy
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