What is Earnest Money?
Once you found the home you want to make an offer on here in the Portland Metro area, You and your REALTORÂ® (me)will then write up and offer to purchase using the Sales Agreement..or often times referred to as the Earnest Money Agreement. Besides the sales price and down payment, you'll also need to offer earnest money.
What is Earnest Money?
In a nutshell, earnest money is an amount that you will agree to forfeit to the seller should you decide to back out of the agreement after all the contingencies have been met. It's financial compensation for taking their home off the market during that time and is a way of showing good faith that you are going into this purchase with the intention of buying the home.
How much Earnest Money should I offer?
Here in the Portland Metro area, earnest money is typically somewhere around 1% of the sales price. That said, the higher the earnest money, the more serious you will look to the seller. If you are in a multiple offer situation, a higher earnest money amount can give you the edge.
What would have to happen for the Earnest money to get forfieted to the sellers?
The following is from the Oregon Sales agreement page 6, Section 26.
So, from the buyers side, if you have misrepresented your financial status, your bank doesn't pay when theÂ check is endorsed, you fail to redeem your promissory note when due, or you fail to complete the transaction according to the agreement, then the earnest money will go to the seller as their only compensation.
What are the contengencies that are normally in the Sales Agreement that a buyer needs to sign off on?
Â There are three main contingencies where once a buyer signs off on them and then decides to terminate the agreement, they will forfeit the earnest money to the sellers. They are:
Â 1. Inspections: Usually a buyer has a 10 business day inspection period to get all the inspections they are wanting as per the sales agreement.
Â 2. Seller's Property Disclosures: Unless filled in for longer, a buyer has five business days to review these disclosures.
Â 3. Title Report and CC&R's (Conditions, Covenants & Restrictions): Unless filled in for longer, a buyer has five business days to review.
Â After these contingencies have been signed off on, unless financing falls through or the Appraisal comes back less than the agreed upon amount, you will then forfeit your earnest money if you terminate at this point.
Is the Earnest Money applied to the sales amount?
Yes, when making the offer, both the earnest money and the down payment amounts are deducted from the offer price.
When is the Earnest Money amount cashed and do I need to bring a check?
If you are not using a Prommissory Note, then you will need to have a copy of your earnest money check submitted with your offer. Unless filled in otherwise, most earnest money checks are deposited into an escrow account at the title company within three business (3) days of mutual acceptance. You will need to have the funds available as this check will be endorsed at this time.
Of course, as your REALTORÂ®Â I'll be going over this all in more detail to you as it pertains to your particular offer.
Cindy Westfall ABR,GRI
Prudential NW Properties
5 Centerpointe Dr, Ste. 150, Lake Oswego, OR 97035
Cell: 503-819-5241 Â Â Â Â Â
E-Mail: firstname.lastname@example.orgÂ Â Â Â Â Â Â Â
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