If you are buying a home for the first time, you will hear words and terms you may not have heard before, words like title examination, addendum, conveyance, force majeure… what the heck does all that mean? It can be a little intimidating for a first time home buyer. In this video, I will explain two of these puzzling terms, escrow and earnest money. They really aren’t that mysterious, they just aren’t used very often outside of the world of real estate. Part of my job is to know what all this jargon means, and being able to explain it clearly so you are an educated and knowledgable buyer, and confident you are making smart, informed decisions. Educating folks in this terminology is actually fun for me, and it makes me feel good knowing my clients are some of the best informed buyers in the market!
(Transcript below)
Hey there, this is Debbie Wright with Charles Rutenberg Realty, and I’m here to talk to you today about earnest money.
Alright, you found your dream home, great! Now it’s time to fill the offer out so you can submit it to the seller, and on the first page of the contract it’s gonna be the earnest money area. Now you’re gonna have to decide how much you’re gonna put down. Most of the time, it’s about 1% of the purchase price, but get with your agent and see what they recommend. Once you make the offer and it’s accepted by the seller, then you’re going to move into making the deposit of that earnest money. You are going to drop it off or your agent is going to drop it off to a brokerage or title company or to an attorney, whoever is managing the transaction or is going to be the escrow agent for the transaction. That money is going to immediately be deposited, so please make sure you have the funds available. After that, they’re going to be held in escrow by that neutral third-party until it’s time to close, and then those funds will be applied to your purchase.
Here’s a little tip for you- if you want to make an even stronger offer, go ahead and fill out your contract to state that you will give another earnest money deposit after the inspection period. This actually put you to the top of the list in a competitive situation. Sellers love to see that, they love to see that you’re committed to the transaction, and that deposit can be made after you do your due diligence or inspection period, and you’ve agreed to accept the property and you’ve either negotiated repairs, or the house is in great condition and you would just want to move forward. So that second money deposit can actually differentiate differentiate you from your competition, so something to consider.
Okay can you lose your money? Yes, you can. Make sure that your Realtor has explained to you exactly what the situations are that you could face in losing those funds, and they all boil down to buyer default, and you need to understand what that means. What does it mean, “buyer default”? Typically, it means, this scenario is usually what plays out, not always, but just so you understand. You’re moving toward the closing table, the inspections have been done, financing has been approved, and all of a sudden, the house that you really, really wanted is back on the market. And you’re like, “Oh no, this was just my second favorite.” Well then you’re like, “Whoa, what what what what can we do? Can we cancel?”
Well, you can, and the seller is going to confiscate your earnest money as damages. Is that worth it to you? Well, that’s a discussion that you need to have with your Realtor, and figure out if it is. If we’re talking about your true dream home, then it may be worth something to consider. Either way, having the advice of a professional is key at this point, and it doesn’t cost you anything to have someone represent you. A Realtor representing the buyer is typically paid by the seller, at least in the state of Florida. There are some instances where they are not, and you would have to discuss that situation with your particular Realtor, but for the most part, compensation is made by the seller.
So if you have any questions, if you want to leave a comment below, like me, please reach out, you can always call, text, email, Facebook message me, I respond. So I look forward to hearing from you, and I’ll talk to you soon. Bye-bye.
Want To Learn More? Chat with Debbie
(813) 775-8516
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