When you make an offer on a home, you may be asked to provide earnest money: a deposit that shows the seller you’re serious about purchasing the property.
Think of earnest money as a good-faith deposit. Rather than going directly to the seller, the funds are typically held by a title company, real estate brokerage, or real estate attorney in an escrow or trust account until closing. If the transaction moves forward as planned, the earnest money is usually applied toward your down payment or closing costs.
But what happens if the sale falls through?
The answer depends on the terms of your purchase agreement. If the contract includes contingencies, such as financing, a satisfactory home inspection, or appraisal, and those conditions aren’t met, you may be entitled to have your earnest money returned. However, if you back out of the contract for a reason that’s not covered by the agreement, you could forfeit your deposit.
Since earnest money is governed by the terms of the purchase contract, it’s important to understand your rights and obligations before signing. An experienced real estate attorney can help review the agreement, explain the contingencies, and guide you through the closing process.
Whether you’re buying your first home or your fifth, understanding how earnest money works can help you move through your real estate transaction with greater confidence.
Contact Rochford Langins Jarstad today if you are looking to buy or sell a home!