The earnest money is usually deposited in order assure all the parties involved that buyer is serious about buying a home. But, what if the seller decides to back out from the process? Is there a fair way the seller can keep that earnest money as a compensation of the time and cost spent in the process so far?
We are going to discuss the scenarios which allow seller to keep the earnest money if sale doesn’t go through.
Know about the amount of earnest money that would be enough
The amount of earnest money can be as low as $100 to the price of entire home. However, the ideal amount should be what can work for both the buyer and seller. While a seller wouldn’t want to put a big amount as earnest money, the seller needs to ensure that deposited amount truly reflects buyer’s seriousness in buying the home.
With that said, the authority of deciding what would be an ideal amount stays with the seller. Hence, a seller needs to ensure that their earnest money deposit demands are not scaring away the potential buyers.
Make sure that earnest money is cashed out
Most of the buyers submit a check as earnest money deposit to the brokerage. Sometimes, the brokerage keeps the check in good faith and doesn’t cash it until the deal is closed. So, ask your brokerage to cash the check as soon as possible.
Although, the cash is going to stay with the escrow but that will prevent the buyer from cleaning the account, from which the check was generated, if they intend to back out from the deal.
Know about all possible eventualities
There are several contingencies that enable buyers to legally back out from the deal without getting any penalty. In other words, these contingencies lead you to receive the penalty in form of time and money that you spend on property in order to sell it. Generally, these contingencies are often used as the back doors that distracted buyers use to get out of a deal unharmed.
So, it is important to shut all those back doors in order to ensure that buyer remains on the deal or pay the penalty. Those contingencies are as under.
- Incomplete mortgage enables the buyers to turn back from a deal’s halfway.
- If the home’s hidden issues have been discovered after the earnest money was deposited by the buyer, buyer has the right to finish the deal without closing.
- If the title search returns the results with property details having ownership issues, buyers can void the contract.
- If property is not worth the price that seller is demanding, buyer can back out from the deal.