Your Home Purchase - Earnest Money

Have you any idea what earnest money is? Earnest money is a varying amount that shows

the seller how serious you are about buying their property, and it's really very important.

Earnest money and the down payment are different. The down payment is often a set amount of the total purchase price offered in advance in good faith. Earnest money is focused on showing how serious you might be about your offer. Sometimes people are $5,000 serious, some others might be $500 serious. Whatever you offer is based completely on your budget and your comfort level. But you should know that the owner will frequently choose an offer with a lot of earnest money presented.

When providing the earnest money, do not give the check to the home owner. This money ought to be placed into your escrow account or given to the broker or the title company for safe keeping. Make perfectly sure that this company does not immediately cash the check, as this will result in a massive delay if the sale falls apart and you have to have that money back. Your best option is to use a company that can simply hold the money until everything is decided.

Keep in mind, there are ways to protect yourself further, especially if you are concerned about losing money. Contingencies within your contract will state under what circumstances you will receive a refund if the deal doesn't happen.

You must also incorporate a "liquidated damages" clause to your contract. So, if you need to abruptly back out of the contract, you are taken care of. Why do you really need this clause? Well, if you ever back out the seller can sue you for damages or pressure you into the home purchase against your will. This clause shields you against those actions.

And that is it. The house of your dreams is only a bit of money and a protective contract away.

by: Barbara Samuson

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