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.
