When you enter escrow on a Westfield property, you must provide an earnest money deposit. Typically, this is about 1-2% of the purchase price. This money sits in an escrow account until your final closing. At that time, it becomes part of your down payment. Why provide an earnest money deposit? Because it shows how serious you are about buying the property. In exchange, the seller agrees not to entertain any other offers while the property is in escrow. However, buyers may still lose their deposit by making these easily avoidable mistakes.
How to Avoid Losing Your Earnest Money Deposit
Yes, the fewer contingencies you ask for in your sales contract, the more attractive your offer looks to a seller. In fact, sellers love to see no contingencies. But things like a financing contingency and a home inspection contingency protect you, the buyer, in case your financing falls through or something major comes up on the home inspection. With these contingencies in place, you receive your entire earnest money deposit back if you walk away from the sale.
Pay Attention to Time Deadlines
Your sales contract stipulates a specific timeframe to perform tasks necessary to complete the sale. These include securing your financing, getting an appraisal, and performing a home inspection. In your sales contact, look for the phrase “time is of the essence”. That means that, if you miss your close for any reason whatsoever, you will receive a notice to perform. Make sure you meet your deadlines or you run the risk of losing the sale and your earnest money deposit.
Do Not Succumb to Cold Feet
Finally, you feel nervous that you may have overspent. Or you decide you are not quite ready to pull the trigger on a new Westfield home. You decide to back out. If you do not have any contingencies in place, the seller keeps your earnest money deposit if you decide to terminate the sale. Before you decide to submit your offer, make sure that this really is the house you want to make a home.
Any of these situations may cancel your home sale and allow the seller to keep your earnest money. Contact me when you decide to look for your next Westfield home. I will help you with all aspects of the home buying process.