One of the most common questions I get, from both sellers and buyers is what do I need to know about earnest money deposits?
There is a variety of information that I will provide you, but here is the short answer. It is a deposit the buyer gives to the seller to show the seller that he/she has a serious interest in purchasing the seller’s property.
To give a more robust answer though, it involves several things.
- The earnest money does not go directly to the seller. In Texas, the money is usually stays, with the title company in escrow.
- If the buyer goes through with the purchase of the property, the earnest money will be a credit towards the purchase price.
- What if the buyer does not go through with the purchase of the property? Then the earnest money may go to the seller as compensation for the buyer not purchasing the property.
Can the buyer lose their earnest money deposit?
Yes, it is possible. There are contingencies that can be placed into the contract to help lessen this possibility. The most common way people will lose an earnest money deposit is when all of the contingencies expire and for some reason you are unable to purchase the property. Upon termination of a contract a release must be signed by both parties and delivered to the title company. The title company will then deliver the earnest money to the party indicated on the release.
How can I get my earnest money deposit back?
As a buyer, if you are in your contingency period and you terminate the contract, you may get your earnest money back. A release is signed by both parties (seller and buyer) and delivered to the title company. The title company will then return the earnest money to the party indicated on the release.
Can you think of anything else you may need to know about earnest money deposits? I’m ready to provide an answer for you.
