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What You Need to Know About Earnest Money Deposits

What You Need to Know About Earnest Money Deposits - Orlando Homes for Sale

If you’re buying a home for sale in Orlando, Baldwin Park or Longwood (or anywhere else in central Florida), you’ll have to put down an earnest money deposit to show the seller you’re serious.

But what is earnest money, where does it go, and do you ever get it back?

What You Need to Know About Earnest Money Deposits

An earnest money deposit, commonly called a good faith deposit, is money you put down on a home to show a seller that you’re serious about buying. It’s not the same as your down payment; this is money that comes out of your pocket before you even obtain financing on the home. You include your earnest money with your purchase offer.

If you’re like most people, you need to know:

  • How much an earnest money deposit costs
  • Who holds your earnest money
  • What happens to your earnest money deposit when you buy – or don’t buy – the home

How Much Does an Earnest Money Deposit Cost?

You can expect to spend between 3 and 5 percent of the home’s purchase price on an earnest money deposit. Let’s say you’re making an offer on a home that costs $100,000. Your earnest money deposit should generally be between $3,000 and $5,000.

The amount you put down as earnest money can – and will – vary based on the home you’re buying, how much the house costs, and even the neighborhood it’s in. When you find a home you love, talk to your Orlando Realtor® about how much you should put down as an earnest money deposit – he’ll be able to give you the guidance you need.

Who Holds an Earnest Money Deposit?

You never, ever give your earnest money deposit directly to the seller, even if you’re buying a For-Sale-By-Owner home. Instead, you give your Realtor a certified check or money order. Your agent will then give it to his or her broker, or the seller’s broker, who will put it in an escrow account that nobody can touch. The seller can’t access it, and neither can you. The money sits in escrow until closing day.

What Happens to Your Earnest Money Deposit When You Close on the Home?

When you close on the home, your earnest money deposit still belongs to you. The money you put down will be applied to your:

  • Down payment
  • Closing costs
  • Other fees
  • Mortgage payments

The money never goes to the seller. You only needed to kick out some of your own cash to show the seller you were serious about buying his or her home; that way, the seller could be comfortable taking the home off the market and preventing other buyers from making offers on it.

What Happens to Your Earnest Money Deposit if You Don’t Buy the Home?

In some cases, you can back out of a real estate transaction with your earnest money intact. However, in others, you’ll lose your earnest money deposit to the seller.

Contingencies

If your agent has built contingencies in your real estate purchase contract, such as a financing contingency, an appraisal contingency or an inspection contingency, and one of those provides an “out” for you to back out of the deal, you should be able to keep your earnest money. Your agent will ensure that it’s returned to you as quickly as possible.

Some ways you can get out of a real estate purchase contract because of a contingency include a low appraisal, bad results in a home inspection, or a failure to obtain financing within a certain time frame.

No Contingencies

If you simply get “cold feet” and want to back out of the real estate transaction without a solid reason, the seller may be entitled to keep your earnest money deposit as compensation for having turned away other buyers who would likely have purchased the home.

The bottom line: Before you make an offer on a home and hand over your earnest money deposit, talk to your Realtor and be sure you’re making the right decision. You should be 100 percent invested in buying a home before you come up with an earnest money deposit.

Are You Buying a Home in Orlando?

If you’re thinking about buying a home in Orlando or any of the surrounding communities, we’d love to help you find something that’s just perfect for your needs.

Call us at 407-529-4621 or contact us online to tell us what you’re looking for. In the meantime, explore our:

  • Homes for sale in Alaqua Country Club
  • Homes for sale at Bay Hill Club
  • Country Club of Orlando homes for sale
  • Homes for sale at Keenes Pointe Golf Club
  • Isleworth Country Club homes for sale
  • Sweetwater Golf and Country Club homes for sale
  • Homes for sale at Heathrow and Legacy Clubs

 

 

Posted in: Luxury Real Estate Orlando Tagged: Appraisal Contingency, Contingencies, Earnest Money, Financing Contingency, Inspection Contingency, Real Estate Purchase Contract

What is a Real Estate Purchase Contract?

What is a Real Estate Purchase Contract - Homes for Sale Orlando

When you’re searching for homes for sale at Isleworth Country Club, a house for sale in Windermere or a home for sale in Orlando, you’ll eventually find “the one.”

And when you do, you’ll sign a real estate purchase contract – but what’s in this type of contract, and what does it cover? Here’s what you need to know.

What is a Real Estate Purchase Contract?

A real estate purchase contract, which is also called a residential purchase agreement (or simply a real estate contract), is a binding and bilateral agreement between parties. The contract is based on consideration, which means that something is exchanged for the real estate.

A real estate purchase contract must be in writing in order for a court to be able to enforce it, and both parties must sign it.

What’s in a Real Estate Purchase Contract?

Every purchase is different when it comes to contingencies (conditions that must be met in order for the buyer and seller to complete the transaction), but they all contain:

  • The parties’ identifications
  • Details on the real estate property
  • The agreed-upon purchase price
  • The rights and obligations of each party under the contract
  • The property’s condition
  • What stays and what is not included with the purchase of the property
  • How much earnest money the buyer put down
  • Details on closing costs and who is responsible for them.
  • The closing date
  • Each party’s signature
  • Terms of possession

What Are Contingencies?

Contingencies are “emergency exits” in a real estate purchase contract. They allow the buyer or seller to leave the contract with his or her earnest money deposit intact. Some of the most common contingencies include:

  • Financing contingencies
  • Appraisal contingencies
  • Inspection contingencies

Financing Contingencies

Your real estate purchase contract will most likely include a financing contingency. This condition says that if the buyer can’t get financing to buy the house within a certain time frame, he or she doesn’t have to go through with the transaction.

Appraisal Contingencies

The buyer’s lender will require an appraisal of the property to make sure it’s worth the money the buyer wants to borrow. If it’s not, the lender will most likely refuse to finance unless the buyer comes up with a larger down payment or another appraisal shows that the first was wrong. When an appraisal comes in below the home’s listed price, this contingency allows both parties to back out of the deal.

Inspection Contingencies

A home inspection contingency gives a buyer the right to have the home inspected within a certain timeframe. The buyer can also use the inspector’s findings to cancel the contract or negotiate repairs. Typically, the buyer pays for this inspection.

Do You Need to Talk to an Orlando Real Estate Expert?

If you’re buying a home in Orlando or any of its suburbs, we can help you find the one that’s right for you.

Check out our:

  • Homes for sale in Alaqua Country Club
  • Homes for sale at Bay Hill Club
  • Country Club of Orlando homes for sale
  • Homes for sale at Keenes Pointe Golf Club
  • Isleworth Country Club homes for sale
  • Sweetwater Golf and Country Club homes for sale
  • Homes for sale at Heathrow and Legacy Clubs

We’ll be happy to show you homes in Orlando and the surrounding communities, so when you’re ready to explore your options, call us at 407-529-4621 or contact us online to tell us what you’re looking for. We’ll help you find it.

 

Posted in: Buying a Home, Selling a Home Tagged: Appraisal Contingency, Contingencies, Financing Contingency, Inspection Contingency, Real Estate Purchase Contract

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About Abr Orlando

We love working with Buyers and have worked hard to develop the skills necessary to assist our clients. All of us at Accredited Buyers Representative-Orlando LLC are certified as ABR®’s or working towards that and other NAR Designations to help you find your perfect spot. This short video highlights some of the important benefits of working with an ABR® when buying your next home. Education and Experience produce results for our clients.

ABR Orlando
1936 Lee Road Suite 100
Winter Park, FL 32789
Email: dave.hoyle@abr-orlando.com
Phone: 407-529-4621

  

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