When a buyer submits an offer on a Silver Spring, MD or beyond property, a copy of his earnest money deposit check is included. The check must be deposited into an escrow account (typically the buyer's broker or Title Company's escrow account) within 7 days of contract ratification.
Although we recommend a deposit of about 1% of the sales price, it can be much larger. In multiple offer situations, for example, a larger deposit can help you stand out. That's quite a bit of money and, understandably, many buyers makes that a bit nervous.
Silver Spring, MD Buyer FAQ: when is my deposit at risk? Could I really lose my earnest money?
When I go over the paragraph concerning the earnest money in the Residential Contract of Sale, I also relay the following Real Estate story from the trenches to my buyer clients:
I was the listing agent on a property and represented the sellers. Our buyer's offer was chosen because the financing appeared very strong. There was a solid preapproval letter from a local reputable lender, a loan officer who answered her phone and a very experienced buyer's agent.
We moved along just fine: home inspection, termite inspection and appraisal were all done with little to no problems. Communication was excellent and all parties were kept up-to-date along the way.
Until about a week prior to closing that is.. about 4 weeks into the contract. All went quiet.
The scheduled settlement date was set for a Friday, a week prior we had yet to receive the financing commitment letter. The lender and buyer's agent kept talking about one "thing" that still needed to be verified but what that "thing" was exactly, was rather confusing. However, we were assured that all would be well... the Friday before, on Monday and then Tuesday, the day the buyer's financing contingency expired.
On Wednesday we were told that that "thing" that needed to be verified was taking a bit longer and we would likely have to push back our settlement date. But, there was still a glimmer of hope to settle on time ... so let's all hold off with the extension until Friday.
On Friday the settlement was canceled.
What happened? As it turned out, the buyer had quit his job on Monday but did not inform anybody. The lender found out on Wednesday when a final verification of employment call was made... a day after the buyer's financing contingency expired.
The buyer lost his earnest money deposit.
Per the Financing Addendum the buyer was required to promptly inform all parties if there was a change in his finances/employment that would impact his loan approval. He did not do that. Instead he thought that nobody would find out.
Silver Spring, MD Buyer FAQ: when is my deposit at risk? Could I really lose my earnest money?
Yes! When you, as the buyer, default and not perform according to the contract conditions, your earnest money deposit could be at risk. The contract between buyer and seller is legally binding!
Don't go out and make any large purchases between making an offer and settlement. Don't max out your credit card. Don't lend large sums of money to a friend. Don't misrepresent your finances. Don't lie about your employment. Don't quit your job days before closing.
Do follow all requests of your loan officer and provide any and all documentation promptly. Do work closely with your REALTOR®, discuss step-by-step what will happen between contract and close and when all contingencies expire. And do inform your REALTOR® and loan officer promptly about any change in circumstances!
When you follow the above advice, you won't be putting your earnest money deposit at risk but walk into settlement with a smile!
*I am a REALTOR® & ABR® (Accredited Buyer's Representative) in Silver Spring, MD and beyond but I am not an attorney. No legal advice is given nor implied. If you are in need of legal advice, please consult legal counsel.*
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