Imagine this. You are selling something expensive to someone you have never met a day in your life. You have taken this expensive something offline and it is no longer available for anyone else to purchase. The person promises you that they are going to buy it, but they need 30-45 days before they can pay you. The 30-45 days is now up, and the person changes their mind about the purchase. How do you feel? Most of you are likely completely pissed because you could have sold it to someone else! You’ve wasted time with this non-committed person!
Ever heard of a deposit? Deposits usually make the difference between a committed buyer and a non-committed buyer. And when the deposit is non-refundable, people think twice about holding up your product. This is what home sellers call trust money (formerly known as earnest money). Trust money is usually 1% of the purchase price of the home. For example, it would be expected that you put down $1,000 trust money on a $100,000 home. Home sellers want to know that you, as the buyer of their home, are committed, and not going to bail on the purchase agreement in the last hour. And if you do, they get to keep your trust money. Most would agree that this is only fair.
Now, before you raise your hand to ask a question, let me try to address the obvious question.
Under what circumstances can you get your trust money (deposit) back?
1. If after your inspection is completed, and you are still within the inspection contingency timeframe (typically 10 days), and you are not satisfied with the inspection or the seller is not willing to repair the items you requested, you can get your trust money back.
2. If the mortgage lender is unable to grant you a loan and can show proof that you did not qualify for a mortgage loan due to the financial criteria not being met, you can get your trust money back.
Other than that, if you default on any part of the purchase agreement between you and the seller, the seller gets to keep the money.
But here is the silver lining. If all goes well, and you actually go through with the purchase, just like any other deposit, the money goes towards the purchase of the house. The seller does not get to pocket it for keeps. So, virtually, if you do what you said you were going to do, its always your money. But the seller simply gets to hold on to it in the beginning to make sure you don’t disappear in the night like a thief, or rather just a non-committed buyer who made them miss out on other opportunities to sell their home.
So if you are serious, and you are sure...its all good!
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Hi. I'm Tamara Manuel. I am a wife, a mom, and a realtor. I am like many of you, in that I juggle and wear multiple hats at any given time. I am easily inspired by others and have been told that I inspire a few myself. This blog was created to help inspire you to purchase a home, or if nothing else, equip you with plenty of knowledge so that if you ever decide to, you will be an informed buyer or seller. I just have four requests of you...