What Home Buyers in Atlanta Should Know About Earnest Money

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Making your offer stand out in today’s competitive marketplace is crucial. You can do this by offering earnest money. The seller will also call it a good faith deposit. Earnest money is a small amount the buyer puts down to show her seriousness about buying. Although the idea may seem straightforward, putting it into practice can be very challenging. The following is a list of essential information for home buyers in Atlanta about earnest money.

What Is Earnest Money?

You need to understand your earnest money before putting it down as a home-buyer in Atlanta.

It is money paid before closing. This is to show that the buyer is serious about purchasing the home. When a buyer or seller signs a purchase contract, the seller takes the property off the market, and the transaction proceeds to closing. A failure to close the deal will force the seller to relist it and start over. This can lead to big financial consequences.

If the buyer backs out, the earnest money safeguards the seller. It usually represents 1-3% of the sale price. Until the transaction is completed, the money is kept in an account. Depending on what is typical in your location, it will vary. If everything goes as planned, the earnest money will be applied to the buyer’s down payment or closing costs. 

Sellers also get earnest money. This decreases the chance of buyers placing multiple offers for the same house and then walking off after the seller takes that home off the marketplace. Contact a local agent to learn more about earnest cash in the Atlanta area.

How Much is Earnest Money?

answer to this question will vary depending on where you live (especially if there are frequent cash offers or bidding wars) and the condition of your property, these guidelines can be helpful.

The average good-faith deposit for real estate is between 1% and 3% of the property’s price. You might need to pay 10% if you sell a highly competitive property with multiple buyers. Sellers may prefer to establish fixed amounts in order to filter out non-serious buyers.

It is unlikely that your deposit will be refunded, but you can offer an amount the seller would appreciate without taking on financial risk. A professional real estate agent can help you determine an acceptable earnest money amount. They will evaluate the property and other market factors and then give you a figure that falls within the range.

In most cases, the earnest money goes to an escrow or third party who holds the funds. The money is kept in the account until closing. The money is usually applied to the closing costs and the buyer’s down payment.

Losses and Refunds

In the event that a deal is canceled, home-buyers in Atlanta won’t lose their earnest funds. Sometimes, buyers can get this deposit back, especially if the contract contains contingencies.

  • When a home inspector reveals severe housing defects. If the appraisal amount exceeds the home sale price, the seller won’t re-negotiate
  • When the home-buyer is unable to secure financing
  • When a buyer can’t sell their home before buying the new one
  • This is why you should pay attention and understand all contract clauses.

However, if these conditions are met, you can still lose your earnest cash.

  1. “Financing or inspection contingencies protect your earnest money in case your mortgage does not go through or the house becomes unsafely dangerous. You can waive any contingency, and your good faith deposit is forfeited if the property doesn’t sell. The contingencies are waived.
  2. The contract timelines are ignored. The timelines for home purchase contracts usually specify the timeframe within which the buyer must complete the purchase. If you fail to close the transaction within the agreed time, it is a breach of contract. You could lose your deposit of good faith.

Protecting Your Earnest Money

Also, you should take precautions to safeguard your earnest money deposit against fraud and unjustifiable forfeiture. These measures include the.

  • It is important to get everything in writing. You should ensure that your contract clearly outlines what amount is due to cancel the sale and who gets the earnest money. Add any amendments regarding buyer responsibilities and timelines.
  • Managers should be trusted third parties such as an escrow, legal, title, or brokerage firm. Get a receipt and make sure that funds are in an escrow account. For the funds, use an escrow bank. Do not give your earnest money directly to the broker or realty seller to avoid trust issues.

  • Comprehend all contingencies. Make sure that you understand the contingencies. The most important thing is ensuring you have all the clauses that protect you in a home purchase agreement.

  • Meet all of your buyer responsibilities. “Real Estate purchase agreements typically set deadlines to protect sellers. You must respond promptly to all inquiries and provide documents as requested. Also, you must meet the inspection, appraisal, and closing deadlines to avoid breaking the contract.

Make sure to use an experienced Atlanta Agent

The purchase of a home can be an expensive one. Earnest money deposits can add up to large sums. You want to ensure that you have a trusted agent in Atlanta to help you protect your earnest money in the unlikely event that something happens. We can help you protect your earnest income if, as a home-buyer, you call us at 678-337-1165.

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