Which of the following Best Describes an Earnest Money Agreement

However, serious money is not always refundable. For example, the seller may keep the money serious if the buyer decides not to make the purchase of the house for unforeseen events not listed in the contract or if the buyer does not respect the schedule established in the contract. The buyer, of course, will lose the serious money deposit if he simply changes his mind and decides not to buy. Serious money is usually paid by certified check, personal check or bank transfer to an escrow or escrow account held by a real estate agent, law firm or securities company. The funds will be kept in the account until closing when they are used for the buyer`s down payment and closing costs. It is important to note that escrow accounts, like any other bank account, can generate interest. If the serious funds in the escrow account earn interest of more than $600, the buyer must complete the W-9 tax form with the IRS to receive the interest. Let`s say Tom wants to buy a $100,000 home from Joy. To facilitate the transaction, the broker arranges to deposit $10,000 as a deposit into an escrow account. The terms of the subsequent agreement, signed by both parties, stipulate that Joy, who currently lives in the house, will move in the next six months. Serious money is always returned to the buyer when the seller terminates the business. Serious money is a deposit to a seller that represents a buyer`s good faith in buying a home. The money gives the buyer more time to get financing and complete a title search, property valuation, and pre-closing inspections.

In many ways, serious money can be thought of as a deposit on a house, an escrow deposit, or credulity money. The buyer might be able to recover the serious money deposit if something specified in advance in the contract goes wrong. For example, serious money would be returned if the house does not estimate the sale price or if the inspection reveals a serious defect – provided that these contingencies are listed in the contract. But she is not able to find another place of residence until the day of the move. As a result, Tom cancels the transaction and receives the money from his deposit. The deposit money earned $500 in escrow account interest during this period. Since the amount is less than $600, Tom does not need to fill out an IRS form to recover the amount. When a buyer decides to buy a home from a seller, both parties enter into a contract. The contract does not require the buyer to buy the home, as reports from the home appraisal and inspection may later reveal problems with the home. However, the contract ensures that the seller removes the house from the market while it is inspected and valued. To prove that the buyer`s offer to buy the property is made in good faith, the buyer makes a serious money deposit (EMD). While buyers and sellers can negotiate serious money deposit, it often ranges from 1% to 2% of the home`s purchase price, depending on the market.

In hot real estate markets, the serious cash deposit can range from 5% to 10% of the sale price of a property. In most cases, real money is delivered when the purchase contract or purchase contract is signed, but it can also be attached to the offer. After deposit, funds are usually held in an escrow account until closing, when the deposit is applied to the buyer`s down payment and closing costs. There are several things that potential buyers can do to protect their serious cash deposits. Although depositing serious money is often a percentage of the sale price, some sellers prefer a fixed amount, such as $5,000 or $10,000. Of course, the higher the amount of serious money, the more likely the seller is to seriously consider the buyer. Therefore, a buyer should offer a deposit serious enough to be accepted, but not a deposit so high that extra money is put at risk. .