Mistakes That Could Put Your Deposit at Risk
If you have found a piece of property you want to purchase, you might need to or probably have already offered a good faith deposit known as earnest money into an escrow account. Sellers usually apply this money to buyers’ closing costs and down payments. If something happens and you cannot proceed with the purchase, you may or may not be able to recover your earnest money deposit. If you are looking to purchase property, it is crucial that you are careful about what you do and don’t do because your actions could determine whether or not you can get back your earnest money deposit. In this article, we discuss some of the mistakes that could cost you your deposit.Mistake #1: Agreeing That Your Earnest Money Be Considered Non-Refundable
Earnest money deposit can be anything between 1% and 3% of the property’s price. However, depending on certain factors, that percentage can go up. Regardless of how much you pay as an earnest money deposit, it is not advisable to agree that your deposit be considered non-refundable. You might want to agree to such an arrangement to convince the seller that you are serious about making the purchase, but doing so is a huge risk. If something happens that makes it impossible for you to close the deal, you won’t be able to get back your earnest money.Mistake #2: Not Meeting Set Deadlines
As a buyer, there are certain responsibilities you may need to perform. For example, you may need to get the property inspected and finalize the terms of your mortgage loan. However, you need to do these things within a set period of time. If you fail to meet the set deadlines, one of two things could happen. First, the seller may allow you extra time if you are not able to meet the deadline because of something outside of your control. Second, if you do not have a good reason for not getting things done within the set period of time, the seller could cancel the deal. In such a case, you may not be able to get your earnest money deposit back.Mistake #3: Waiving Contingencies
Whenever you are signing an agreement for a property, there are contingencies to which you will ultimately agree. Some contingencies are meant to protect the seller, and some are meant to protect the buyer. When signing the agreement, you may feel the need to waive contingencies to increase your chances of getting the property. However, it is not advisable that you do this. If you waive contingencies, you are at risk of losing your earnest money deposit if something comes up that makes it impossible for you to close the deal.Mistake #4: Changing Your Mind
If you decide that a property is not right for you after two or three viewings, the seller has the right to keep your earnest money deposit as reimbursement for wasting their time and making them possibly lose out on another sale. There is no contingency for a change of heart.Contact Us for Legal Help
If you are looking to purchase property and have questions or concerns, contact our skilled attorneys at SAC Attorneys LLP.