Have questions? Call us at (980) 272-7634 and one of our agents will be happy to!
Earnest Money Deposit
Dated: July 5 2019
We've touched the due diligence fee and now it's time to discuss the earnest money deposit. So what is it? Earnest money is a deposit that you may choose to put down when purchasing a home. Some agents and consumers consider it crucial to put some "skin in the game" if you will. Again, the size of this deposit will depend on your region, market, and purchase price.
So where does this deposit go? At least in the Charlotte market most firms choose to have the closing attorney hold on to the earnest money deposit. Just like the due diligence fee, this check is cashed only this one is held onto in a trust account until closing or when a release is signed by both parties.
Also just like the due diligence fee, if the transaction closes, then the earnest money deposit is a credit to the buyer at closing. So if you're purchasing a $200,000 home with 5% down and put down a $1,000 earnest money deposit, then instead of having to bring $10,000 (plus closing costs) then you'll bring $9,000 (plus closing costs).
Now what happens if the transaction doesn't close? Here is where it can get tricky. In the state of North Carolina a buyer can walk away from a real estate transaction with or without reason during the due diligence period. As long as that deadline has not expired, then the contract states that the earnest money is to be returned to the buyer. Typically, if the buyer walks away AFTER the due diligence period has expired, the contract states that the earnest money deposit will then be forfeited over to the seller.
Does that mean that the other party isn't going to fight the release to the party it is owed to? Not necessarily. The key takeaway here? Never let your due diligence period expire without having all of your ducks in a row. In North Carolina we even have a form to extend the due diligence period if say the appraisal hasn't come back. Find an agent who isn't afraid to use it!
If you have any additional questions about earnest money, or real estate in general, reach out to one of our agents via phone or text at 980-272-7634.
Prior to real estate, Nikki worked full time in HOA management. Her background in associations gives her an interesting take on the process and can really help you understand those bylaws and declara....