Charlottesville Real Estate FAQ:
What’s an Earnest Money Deposit?
When buying a home in Charlottesville, a buyer makes an earnest money deposit as a show of good faith and serious commitment to purchasing a property. The earnest money deposit is typically collected by the buyer’s agent at the time you write your offer in the form of a personal check. The terms of the earnest money, also known as an escrow deposit, are a negotiable item in the residential contract of purchase.
How much earnest money does a buyer need to put down?
The amount of the earnest money deposit varies according to the market conditions, price and type of property being purchased. When making an offer on homes for sale in Charlottesville expect to put down between $1,000 to $5,000. Again, the amount is negotible between the buyer and seller. However, the higher the amount the more seriously your offer is taken.
Is an earnest money deposit required?
No, but don’t expect a seller to accept your offer without one.
What happens to the earnest money deposit?
Typically, the earnest money deposit is held by either the listing agent’s office or the selling agent’s office in a special brokerage escrow account. However, in the instance of a foreclosure or short sale it could also be held by a Title company or Attorney. The deposit is applied towards the buyer’s down payment and closing costs at settlement.
Will I earn interest on my earnest money deposit?
Usually not since most earnest money is held in special non-interest bearing brokerage escrow accounts.
What happens to the escrow deposit if the transaction doesn’t close?
It depends on the terms of the residential contract of purchase and why the transaction did not close. A contract typically contains contingencies that must be meet in order for the contract to proceed to closing. For example, a common buyer contigency is obtaining financing. If a buyer fails to obtain financing, through no fault of the buyer, during the contigency period and provides the seller with written proof then the buyer will probably be entitled to refund of the earnest money deposit. But, if a buyer gets through the contigency periods and then decides they just don’t want to buy the house then expect to forfeit the earnest money deposit. The seller may also be entitled to additional damages under the law. So, if a buyer finds themselves in this situation it’s critical to consult with an attorney right away.
Earnest money is a very important and must be taken seriously. Make sure you understand the terms of your earnest money deposit. Also, seek home buying guidance from an experienced buyer’s agent who will help you stay within the contigency guidelines of your real estate contract so you don’t risk losing your earnest money deposit. If you have any questions about buying Charlottesville real estate or need the guidance of an experienced buyer’s agent, contact us today. We’re here to help!
Photo Credit: Lumaxart on Flickr (CC BY-SA 2.0).
Copyright © 2012 by Allegra Williams
Charlotesville Real Estate FAQ: What’s an Earnest Money Deposit?
