Why you must insist on earnest money in your real estate transaction

| Mar 31, 2021 | Real estate transactions

You want to list a property for sale in the region, so you contact a Tucson realtor to manage the sale. But one provision that must be included in your purchase agreement is that the buyer must put up earnest money.

This good faith deposit indicates the buyers’ intent to purchase the property is sincere. It’s at this point that the property is removed from the marketplace and listed as “Sale Pending.” Should the buyers change their minds or otherwise not go through with the purchase, the sellers can keep the earnest money as compensation for their losses when their property was off the market.

Earnest money can be good for buyers, too

You finally found your family’s dream home. All you’re waiting for is approval on your mortgage loan from your lender. But there are others who are interested in the property as well. Earnest money can be what separates the wheat from the chaff. The sellers will realize that your intentions are serious, and you are ready to commit. If they have multiple offers, a hefty good faith payment can make you a more attractive buyer.

Where does the earnest money go?

In between the earnest money transfer and the sale of the property, the money sits in an escrow account. It will eventually be applied to the purchase or the closing costs on the home. In the event the buyer reneges, the seller keeps the deposit.

Protect yourself legally at all phases of the buy and sell process

There are myriad ways that a real estate transaction can fall apart. Don’t let that be your fate. Arranging for a simple document review can ensure that all salient points are contained within the contract and fully protect your interests. Keeping your real estate attorney in the loop from the very beginning can smooth the path so that the transaction unfolds as it is intended, with no unpleasant (and expensive) errors.