Home Buying in 98375>Question Details

jameskim80, Home Buyer in Lakewood, WA

what is earnest money for?

Asked by jameskim80, Lakewood, WA Mon Feb 3, 2014

I'm currently trying to buy short sale condo.
what is earnest money for?
why do you need to give bank or send to escrow earnest money first?
do you need to give them earnest money before bank approve?
is the earnest money is part payments?
for example if condo cost 100k then since i gave them my $500 earnest money
so i just need to deposit $95,500 when i do closing since they already took $500? please explain to me why do you have to put $500 earnest money first before bank approve. and can you get your $500 back if you cancel the condo later?

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Answers

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An earnest payment is a specific form of security deposit made in some major transactions such as real estate dealings or required by some official Procurement processes to demonstrate that the applicant is serious and willing to demonstrate an earnest of good faith about wanting to complete the transaction.
0 votes Thank Flag Link Tue Feb 4, 2014
Short Sales are sticky transactions and can cost a buyer dearly with a protracted lienholder approval period (with added salt in the wound if the lienholder counters and short sale negotiator fails to proceed-)---my advice: CHOSE YOUR AGENT CAREFULLY to avoid these costly mistakes that I see routinely...at least minimize the probabilty of a failed outcome.
0 votes Thank Flag Link Mon Feb 3, 2014
So do you have to give your earnest money to escrow office ? So that they can deposit before bank approve?
0 votes Thank Flag Link Mon Feb 3, 2014
It depends upon how the contract is written....sometimes escrow gets opened at the beginning, sometimes depositing a buyer's earnest money check is suspended until written lienholder consent is provided.
Flag Mon Feb 3, 2014
Earnest money is a necessary component of contract law (consideration), is credited towards a buyers purchase price or closing costs, unless said buyer breaches contract- and provided buyer's agent advised buyer to check appropriate box on MLS contract form - this becomes the sole remedy for a seller in the event the buyer breaches their contract. Seattle WA Realtor
0 votes Thank Flag Link Mon Feb 3, 2014
Earnest Money: "A sum of money paid by a buyer at the time of entering a contract to indicate the intention and ability of the buyer to carry out the contract. Earnest money is applied against the purchase price. The contract provides for forfeiture of this sum if the buyer defaults."
0 votes Thank Flag Link Mon Feb 3, 2014
Earnest Money is used to Show how serious you are about your offer on a property. This will confirm that we are not waisting the sellers or sellers agents time.
0 votes Thank Flag Link Mon Feb 3, 2014
All great questions to ask your REALTOR. In a short sale YOU WILL HAVE A GAZILLION more questions. So, what did your Realtor say? -----------Without the requirement to secure earnest money, nothing prevents anybody from writing an offer on everything on the market. Then you would be asking, "why is everything shown as 'under contract?." ========= The earnest money will be applied to your purchase and will appear on the HUD! If you are unable to complete the purchase AND the cause for that non=proformance is permitted, the ernest money will be returned to you.======= You should be aware, when you write that check, IT WILL BE DEPOSITED! Otherwise it is just a piece of paper in the folder. ---------- You are correct to suggest different conditions may exist with a short sale. It was true in years past that earnest was not due until the bank responded with a counter. Those days are gone. The earnest money keeps you honest, makes you wait and gives ALL THE OTHER PEOPLE WHO ARE SPENDING TIME< MONEY AND RESOURCES a reason to think you will stick around. Most buyers do not. So, the earnest is needed even MORE with short sales. ----------Best of success, ------Annette Lawrence, Broker/Associate Remax Realtec Group, -------- Palm Harbor, FL------ 727.420.4041 ------http://FIrstLookHomes.us.
0 votes Thank Flag Link Mon Feb 3, 2014
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