Earnest deposit refund?

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  • #48033
    frankysmom
    Member

    A bit confused about earnest deposit. The workbook states, credited back at closing. I searched the forum and found several posts referring to buyers losing their earnest deposit.

    An example,
    (I am trying to get my earnest money back at this time, however the seller (in my case HUD) is refusing to give me the money back without any valid proof of why the closing did not happen.)

    Perhaps, I am mistaken on what it is..is it not 1% of the loan amount that must be in buyer’s account by time of closing? Perhaps, I am misunderstanding the word credited?

    #48056
    TTrumble
    Member

    Hello frankysmom,

    Earnest money is sometimes referred to as a “good faith deposit” given to the seller toward the purchase of the home. It is not necessarily 1% of the purchase price. I have seen many that were simply a flat $1,000 and some even less. It’s simply a deposit to demonstrate your intent to buy the house so the seller will then take it off the market.

    The earnest money is in fact credited back at closing by subtracting it from the net proceeds that the seller receives.

    If someone loses their earnest money, then they (and their realtor) failed to properly negotiate terms for the return of the money and have those terms specified in the Purchase and Sale Agreement in case the deal falls through. Don’t let your realtor just “write up the deal”. Their job is to fight for you and negotiate the best deal possible for you in EVERY aspect of the transaction.

    Tim Trumble
    Online Operations, NACA
    ttrumble@naca.com

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