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Earnest Money Our contract has a provision regarding the
earnest money to be paid by the buyer. Those
looking for something ultra-simple may find it difficult to understand and
accept the ramifications and complexities o this apparently small and simple
subject.
Here we are talking about the deposit that the
buyer puts up which is subject to forfeiture, if the buyer backs out of the deal
after the seller has accepted the buyer’s offer.
The initial and very practical questions related to this are how much to
get and how to get it. It seems
logical that, within reason, the larger the earnest money, the more likely the
sale is to close. Further, it would
seem to be our agency obligation to the seller to possess and use considerable
skill to accomplish this. In this
regard, the seller’s interest and the agent’s interest are parallel or
identical, since the agent (under the terms of the contract) stands to gain
either from forfeiture or from the closing of the sale.
Many agents are timid and ineffectual in
obtaining enough earnest money. The
amount needs to be large enough to create enough incentive for the buyer to
choose to complete the purchase, rather than lose the earnest money.
Home priced under $100,000, earnest money would be $500 and homes priced
$200,000+ earnest money would be likely $1,000+.
New subdivisions may require more.
Forms of Earnest Money
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Disclosure
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