A question on Trulia Voices today prompted this post. "What is the norm for an earnest money deposit"?
One of the agents who answered said that a buyer should put down as much as they can to indicate their "seriousness" in buying. Really??? Should they also make their offering price as much as they can afford to indicate their "seriousness" in buying???
A buyer's agent who is looking out for his/her clients will negotiate the EMD along with the other terms of the contract.
An earnest money deposit amount isn't something that should be halphazardly thrown out there. Why?
Because the buyer may never get it back!
In most states, the earnest money deposit can only be released from escrow by either an agreement of all parties OR through the order of a judge.
In many cases, if the transaction doesn't come to fruition, someone may be very upset. The only thing that person may have any control over is the release of the earnest money deposit. They may decide they just don't want to sign that release. You know what? THEY DON'T HAVE TO! No one can physically force them to sign that release!
Let's say the contract is contingent upon the buyer's obtaining a mortgage. Said contract states that if the buyer's loan is denied through no fault of the buyer (let's just say their ratios were very close and the underwriter was having a bad day), they get their earnest money deposit back. However, the buyer's have tied the seller's house up for 3 months. The seller is mad. Contrary to what some may say, with a denial letter in hand, the seller can put their house back on the market without a release from the previous contract.
What if the seller doesn't want to release the EMD? It is usually not worth the buyer hiring an attorney to go to court for the release if there aren't any other damages. Listing agents should be careful in pressuring sellers to release the EMD back to the buyer if they don't want to. A listing agents represents the seller and should explore all options for their client. Perhaps the seller should instead consult with an attorney or try negotiating with the buyer to split the EMD.
Tina in Virginia
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Tina Merritt and her Associates. can be reached at email: tina@nestrealtygroup.com or 757-287-6338.
Our Network consists of both buyer and listing specialists helping buyers and sellers in Southeast Virginia, Hampton Roads, Virginia Beach, Chesapeake, Norfolk, Portsmouth, Suffolk, Isle of Wight County, Hampton, Newport News and Poquoson, Virginia. In Southwest Virginia, the New River Valley, Blacksburg, Christiansburg, Radford, Pulaski, Dublin, Floyd, Narrows, Pembroke, Pearisburg, Glen Lyn, Rich Creek, Check, Hiwassee, Indian Valley, Parrott, Newport, Shawsville, Pilot, McCoy, Long Shop, Fairlawn, Wythe, Draper, Willis, Sowers, Elliston, Eggleston, Ironto, Riner, Auburn, Rogers, Giles County, Montgomery County, Floyd County, Pulaski County.
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