Who Holds The Earnest Money?
Hello, I have a simple question.
When earnest money is put toward a RE purchase, who holds the monies? Is this held by the title company or attorney? I guess my real reason behind this question is how can I be sure to get my earnest money back when buying FSBO properties if I need to back out of the offer due to problems with the deal?
Thanks,
Robert
I believe that in California, Title companies handle the escrow on Real estate purchases. If you leave yourself an out in your contract, then you would get your money back as you stated.
So, when I give earnest money for a FSBO, I need to make sure it is delivered to a title company or attorney, rather than the seller, is that correct?
Thanks for taking the time to help.
Robert
You should have an iron clad earnest money agreement specifying under what conditions you get a refund of your money.
State real estate laws will prevail. That said why are you worrying?
I have never given over $500 and sometimes $10 or a promisory note. Unless you are making 10 offers at a time why is this a problem?
[addsig]
Why am I worrying? Because in the past when I have dealt with Realtors, they have suggested the earnest money be significant. I have put down as much as $2000 in the San Francisco area for earnest money.
I just needed to know who to ultimately give the money to, since the seller is probably not in a hurry to give me the money back.
Thanks,
Robert
If dealing with Realtor, they would take the earnest money check and keep it until the contract is accepted. Once accepted the contract and earnest money would go to title company to open title. Working with FSBO's, you'd take the executed/signed contract with earnest money to a title company to open title.
This is how we do it down here in TEXAS
Realtors are contractually bound to do it right; but if you back out for getting cold feet or something, you might have to give up your earnest money. I walked away from $200 of earnest money on an early deal when I found out the property was about to be condemned. Chalked it up as a learning experience.
Earnest money can be used strategically too. I put down $20,000 once on a $71,000 property because I really wanted it (and still have it as a vacation home). For psychological reasons the seller was impressed and it was enough to beat out a higher offer from another buyer. A Realtor was involved so I wasn't worried about the seller flaking on me though.
Loon,
Thanks. I too have put down significant sums when I really wanted to buy the house. However for me, it was always my personal home that I did this with and in a market where it was not uncommon for house to go into bidding wars above the seller's asking price.
Is there are general rule of thumb or percentage that is common for earnest money? In California, I'm not sure people would even look at you for $200, but then maybe I'm wrong as I haven't tried it for that little.
Thanks again.
Robert