Earnest Money for my House Sale Held By Whom?

In a real estate transaction, the earnest money is typically held by a neutral third party, such as an escrow agent or a title company.

The specific earnest money requirements may vary depending on local practices and regulations, as well as the terms outlined in your purchase agreement or contract.

Here’s a general overview of how earnest money is typically handled.

Agreement Terms. The purchase agreement or contract between the buyer and seller will specify the amount of money to be deposited and the conditions under which it can be refunded or forfeited.

Escrow Account. The earnest money is usually placed in an escrow account. An escrow agent, which can be a title company or an attorney, acts as a neutral intermediary and holds the funds securely during the transaction process.

Compliance with Agreement. The escrow agent ensures that both parties fulfill their obligations as outlined in the purchase agreement. This includes meeting specified deadlines, completing inspections, obtaining financing, and fulfilling any contingencies mentioned in the contract.

Disbursement. Once the transaction is successfully completed, the earnest money is typically applied towards the buyer’s down payment or closing costs.

If the transaction falls through due to reasons specified in the contract, the earnest money may be returned to the buyer. However, if the buyer defaults on the agreement without a valid reason, the seller may be entitled to keep the earnest money. A disagreement may call for a legal Interpleader.

Earnest Money rules may be specific to your region.

It’s important to consult the specific laws and practices in your legal jurisdiction, as real estate transactions can vary from one location to another. Engaging a qualified real estate professional or attorney can provide guidance and ensure compliance with local regulations and contractual agreements. Also this is a pretty thorough book if you want to go on an even deeper dive.

You know it’s hard to buy a house right now. Don’t make it more difficult arguing about who holds the earnest money.

Thanks for reading!

-don

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