Comments on: Earnest Money – Where does it go and when? http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/ Seattle's Leading Resource for Real Estate Information Sat, 21 Nov 2009 06:01:18 -0800 http://wordpress.org/?v=2.8.4 hourly 1 By: ARDELL http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-342453 ARDELL Thu, 13 Aug 2009 03:51:09 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-342453 Hi Kendall, The Earnest Money doesn't "come back into your hands". It comes back to "the table" and applied as a credit against your total cash needed to close. Let's say you are paying $200,000 for a condo and your lender fees are $3,500 and other expenses $2,500 and downpayment is $7,000. If the seller is paying your closing costs of $6,000 and your Earnest Money is $2,500, then you need to bring the difference of $4,500. If you are paying your own closing costs then you need your closing costs of $6,000 plus the downpayment of $7,000 less the Earnest Money deposit. So yes, it can be used for downpayment...but don't forget about the closing costs :) The Earnest Money is a credit at closing against the total monies you need to bring to closing, including the downpayment. Hi Kendall,

The Earnest Money doesn’t “come back into your hands”. It comes back to “the table” and applied as a credit against your total cash needed to close.

Let’s say you are paying $200,000 for a condo and your lender fees are $3,500 and other expenses $2,500 and downpayment is $7,000. If the seller is paying your closing costs of $6,000 and your Earnest Money is $2,500, then you need to bring the difference of $4,500.

If you are paying your own closing costs then you need your closing costs of $6,000 plus the downpayment of $7,000 less the Earnest Money deposit.

So yes, it can be used for downpayment…but don’t forget about the closing costs :)

The Earnest Money is a credit at closing against the total monies you need to bring to closing, including the downpayment.

]]> By: Kendall B. http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-342428 Kendall B. Wed, 12 Aug 2009 04:42:30 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-342428 I know the earnest money will come back into my hands, but coming up with the down payment is a little tight for a condo we want to buy (hooray FHA). If the offer is accepted and the earnest money comes back to us, does it go to the payment of the house or can we use it for the down payment like what we were depending on? Thanks :) I know the earnest money will come back into my hands, but coming up with the down payment is a little tight for a condo we want to buy (hooray FHA). If the offer is accepted and the earnest money comes back to us, does it go to the payment of the house or can we use it for the down payment like what we were depending on?

Thanks :)

]]> By: ARDELL http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341670 ARDELL Tue, 14 Jul 2009 04:45:37 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341670 <p>"The lender says we are in default and will get sued if we back out."</p> <p>That's an odd statement for a lender to make. Your contract will tell you the answer. There should be a "liquidated damages" clause as to whether the Earnest Money is the limit that anyone can come after you for damages. I'm assuming you are not local or I could tell you where to look. </p> <p>If your loan application is in both names, you should be able to press the lender for a written response to the application as made. They can't force you to apply differently, and should produce the denial letter you need.</p> <p>You should go to an attorney with your contract regarding liquidated damages and the finance contingency. A simple letter from an attorney shouldn't cost much and the attorney can get the denial letter and also send it to the Broker, being sure to comply with the terms of the finance contingency. Make sure you go to an attorney who specializes in minor real estate matters so it won't cost much. One who is very familiar with the standard real estate contracts.</p> <p>I think what you are running into is people don't understand why not? Why would you not want to buy the place for this reason? I think that is why you are getting the reaction that you are getting. They pull wives and husbands off the loan process very often, without anyone caring. I expect that you care so much...so much so that you no longer want the property as a result, is confusing and frustrating them. Still no reason for them to be that coercive, but I think that's what is happening.</p> “The lender says we are in default and will get sued if we back out.”

That’s an odd statement for a lender to make. Your contract will tell you the answer. There should be a “liquidated damages” clause as to whether the Earnest Money is the limit that anyone can come after you for damages. I’m assuming you are not local or I could tell you where to look.

If your loan application is in both names, you should be able to press the lender for a written response to the application as made. They can’t force you to apply differently, and should produce the denial letter you need.

You should go to an attorney with your contract regarding liquidated damages and the finance contingency. A simple letter from an attorney shouldn’t cost much and the attorney can get the denial letter and also send it to the Broker, being sure to comply with the terms of the finance contingency. Make sure you go to an attorney who specializes in minor real estate matters so it won’t cost much. One who is very familiar with the standard real estate contracts.

I think what you are running into is people don’t understand why not? Why would you not want to buy the place for this reason? I think that is why you are getting the reaction that you are getting. They pull wives and husbands off the loan process very often, without anyone caring. I expect that you care so much…so much so that you no longer want the property as a result, is confusing and frustrating them. Still no reason for them to be that coercive, but I think that’s what is happening.

]]> By: HELP!!!--clarity http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341669 HELP!!!--clarity Tue, 14 Jul 2009 03:34:08 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341669 The above came out wrong. I HAVE been qualified without her on the financing, but we do not want to follow through with the deal if this is the only way to finance. They say I can put her on the title, but not the loan. The contract states " buyer" must secure loan. So are "we" the buyer ? The above came out wrong. I HAVE been qualified without her on the financing, but we do not want to follow through with the deal if this is the only way to finance. They say I can put her on the title, but not the loan. The contract states ” buyer” must secure loan. So are “we” the buyer ?

]]> By: HELP!!! http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341668 HELP!!! Tue, 14 Jul 2009 03:19:08 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341668 My girlfriend and I put an offer on a home as the"buyer". We wanted to be on the loan together, not just one of us on the loan.Together we do not qualify, however I qualify on it by myself. We don't want the house if we can't both be on the loan. Since WE are listed as the BUYER on the contract, and WE have a financing contingency, can we be held in default if we do not want the house with just me on the loan? I do qualify without her? The lender says we are in default and will get sued if we back out. The earnest money came out of her account, not mine. After we paid the earnest money the lender had her put my name on the account.We are not as worried about losing are earnest $ as we are getting sued by the broker. My girlfriend and I put an offer on a home as the”buyer”. We wanted to be on the loan together, not just one of us on the loan.Together we do not qualify, however I qualify on it by myself. We don’t want the house if we can’t both be on the loan. Since WE are listed as the BUYER on the contract, and WE have a financing contingency, can we be held in default if we do not want the house with just me on the loan? I do qualify without her? The lender says we are in default and will get sued if we back out.

The earnest money came out of her account, not mine. After we paid the earnest money the lender had her put my name on the account.We are not as worried about losing are earnest $ as we are getting sued by the broker.

]]> By: ARDELL http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341439 ARDELL Sun, 05 Jul 2009 06:50:02 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341439 <p>How did the business owner learn this during a short escrow vs. before they made the offer? Seems a bit convenient given "the letter" comes from the business owner that creates the loan denial.</p> <p>A case could be made either way, so the mediator will look at the facts, more than you have provided here, and decide. Often they ask you to compromise. If the seller sells the house shortly at the same price, then perhaps the seller will simply release it. </p> <p>Hard to say on this one. Anybody's guess, really. Best is to put yourself in the seller's shoes. How long did they live thinking their home was sold? A few days? Did you cancel the day before closing. Both sides of the story need to come out, not just one side.</p> How did the business owner learn this during a short escrow vs. before they made the offer? Seems a bit convenient given “the letter” comes from the business owner that creates the loan denial.

A case could be made either way, so the mediator will look at the facts, more than you have provided here, and decide. Often they ask you to compromise. If the seller sells the house shortly at the same price, then perhaps the seller will simply release it.

Hard to say on this one. Anybody’s guess, really. Best is to put yourself in the seller’s shoes. How long did they live thinking their home was sold? A few days? Did you cancel the day before closing. Both sides of the story need to come out, not just one side.

]]> By: Meg http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341438 Meg Sun, 05 Jul 2009 05:13:19 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-341438 A Business owner is approved for a loan, and buying a home.Closing date is set. Buyer finds out his company is not predicted to make the money for the next year as expected, and his tax liability will not be covered by his earnings. He notifies the lender, because he is afraid he will not be able to keep up the payments in 2010.Underwriter requests a statement from his business explaining the financial status etc...Letter giver to UW, and loan the unapproved. Sellers will not release earnest money of 10K! There is a financing contingency in the contract with no time frame. 3 day notice of written denial notification was done. Agent is a dual agent with her broker holding money in escrow. We are in Va. I understand the broker can not release the $ w/o the Seller's signature. Dispute clause states it will go to mediation before litigation. Will they be forced to give us the earnest money back? A Business owner is approved for a loan, and buying a home.Closing date is set. Buyer finds out his company is not predicted to make the money for the next year as expected, and his tax liability will not be covered by his earnings. He notifies the lender, because he is afraid he will not be able to keep up the payments in 2010.Underwriter requests a statement from his business explaining the financial status etc…Letter giver to UW, and loan the unapproved. Sellers will not release earnest money of 10K!

There is a financing contingency in the contract with no time frame. 3 day notice of written denial notification was done.

Agent is a dual agent with her broker holding money in escrow. We are in Va. I understand the broker can not release the $ w/o the Seller’s signature. Dispute clause states it will go to mediation before litigation.

Will they be forced to give us the earnest money back?

]]> By: ARDELL http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-340033 ARDELL Thu, 28 May 2009 06:17:38 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-340033 I agree with you. It would appear that the seller was in breach when he could not perform by the closing date. Take a picture of the site with a date stamp or bring witnesses to prove there is nothing to move to. I don't know where you are, but you would be wise to start the process to get your Earnest Money back before a home appears on the site. I agree with you. It would appear that the seller was in breach when he could not perform by the closing date. Take a picture of the site with a date stamp or bring witnesses to prove there is nothing to move to.

I don’t know where you are, but you would be wise to start the process to get your Earnest Money back before a home appears on the site.

]]> By: Raul http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-340032 Raul Thu, 28 May 2009 05:52:36 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-340032 On October of 2008, my wife and I decided to purchase a new manufactured home/land package from an individual seller and his agent. The closing date was March 31, 2009 or sooner and we were asked to put up $3000 of earnest money for this $160,000 deal. The verbal promise was made that we would be in our new home by January of '09. Then we were told it would be the end of January, then it was the first of March, then it was the end of March. Then the closing date came and went without an extension either verbal or written. It is now going to be June of '09 and there is still no house on the property or even a sign of a foundation! We finally asked to get out of the deal due to too many delays and confusion. Now the seller wants to keep the earnest money and is asking for even more for his troubles. I think he dropped the ball by not getting a closing date extension and besides, the property is not the pretty picture he painted at all. He thinks he has troubles, I am being pretty much evicted because of all the different notices that we had to give our present landlord! Now we have to find another house to buy or to rent before the end of June..... On October of 2008, my wife and I decided to purchase a new manufactured home/land package from an individual seller and his agent. The closing date was March 31, 2009 or sooner and we were asked to put up $3000 of earnest money for this $160,000 deal.
The verbal promise was made that we would be in our new home by January of ‘09. Then we were told it would be the end of January, then it was the first of March, then it was the end of March. Then the closing date came and went without an extension either verbal or written. It is now going to be June of ‘09 and there is still no house on the property or even a sign of a foundation! We finally asked to get out of the deal due to too many delays and confusion. Now the seller wants to keep the earnest money and is asking for even more for his troubles. I think he dropped the ball by not getting a closing date extension and besides, the property is not the pretty picture he painted at all. He thinks he has troubles, I am being pretty much evicted because of all the different notices that we had to give our present landlord! Now we have to find another house to buy or to rent before the end of June…..

]]> By: ARDELL http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-339070 ARDELL Thu, 23 Apr 2009 17:18:15 +0000 http://raincityguide.com/2006/02/25/earnest-money-where-does-it-go-and-when/#comment-339070 Tracey, I'm in vacation in L.A. this week, but I think you answered your own question, you just don't like the answer. There are a few occasions when the return of Earnest Money is a unilateral option, meaning you don't need both parties to agree to return the Earnest Money. But those are most often early in the process, within the first 7 to 10 days. Rarely does a contract go on for months without both parties needing to sign to release the Earnest Money...almost never after extensions and near closing can anyone just release the Earnest Money without the signatures of all parties. You are already doing everything you can. I'm confused by your use of "the village". What "village" forces a seller to do these things before he can sell? Who is "the village"? Tracey,

I’m in vacation in L.A. this week, but I think you answered your own question, you just don’t like the answer. There are a few occasions when the return of Earnest Money is a unilateral option, meaning you don’t need both parties to agree to return the Earnest Money. But those are most often early in the process, within the first 7 to 10 days.

Rarely does a contract go on for months without both parties needing to sign to release the Earnest Money…almost never after extensions and near closing can anyone just release the Earnest Money without the signatures of all parties.

You are already doing everything you can. I’m confused by your use of “the village”. What “village” forces a seller to do these things before he can sell? Who is “the village”?

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