When Can Seller Keep Earnest Money-And 7 Ways They Can't - YouTube

What is earnest money? I get this question  all of the time. What is it? How much is it?  

When is it due? What if I don't end up buying  the house? Do I get my earnest money back?  

In today's video I'm gonna go through all of  these questions and I'm also going to go through  

the seven ways that a buyer can get their earnest  money back if they decide not to buy the house.  

If you've got any questions about earnest money  then this is the video for you, so stick around!

Hey everyone! This is Danae Hewitt your  go-to DFW realtor with Briko Realty Services  

I'm here to tell you all the things real estate  here in DFW. So let's get started. What is earnest  

money? Think of it as good faith money the buyer  wants to purchase the seller's home and once they  

are under contract that buyer is going to give  earnest money that they plan to buy the home  

in good faith. So you're basically putting a  small deposit on buying the home. Here in Texas  

that earnest money is due three days after the  contract has been signed by both parties. That  

is three business days. If that third day falls  on a Saturday a Sunday or a holiday, then it is  

due the next business day that is not a Saturday  a Sunday or a holiday. How much is earnest money?  

Typically here that is about one percent of the  offer price that you have put forward on a home.  

Let's say you're purchasing the home for $400,000,  one percent of that is $4,000 that is due to the  

title company. How does the money get to the title  company? Well there's a couple different ways a  

check can be written and Fedexed to them or you  can also wire funds from your bank into the title  

companies account. I do want to strongly strongly  advise that you absolutely check the title  

company's banking info and routing info before  you wire any funds into their account. Wire fraud  

is rampant here in the U.S and you want to do  everything you can to ensure that you're not  

wiring money to a fake account. The title company  is going to email you the wiring instructions,  

this is what you do first. You call the title  company to verify the numbers that they have  

sent you. Speak with a live person and say 'hey  i'd like to wire some money to the account I just  

want to make sure I've got the correct numbers  before I do so. They do this all of the time.  

They definitely know the reason why you're  calling to make sure that that money is being sent  

to the right account. Before you wire funds  call to make sure that you are wiring them to  

the correct account so you don't lose your money.  I do get asked this a lot, does the earnest money  

count towards the down payment on my house? That  answer is yes! Think of it as a pre-down payment  

on your home if you plan to put $50, 000 down  on the property and you've already put $5,000  

down, then of course you're bringing $5,000 to the  closing table because that's already your earnest  

money that you've put forth. And if you haven't  gathered already by now that earnest money does  

need to be cash that is in your account. You  do have to have this money up front when you  

plan to purchase the home. Again you're going  to wire the funds and that cash is immediately  

deducted from your account and put into the title  company's account or you're writing a check.  

Some title companies accept personal checks if  they do that is going to be deposited or you can  

write a cashier's check. But just so you know this  earnest money does need to be funds that you have  

in your account when you put an offer in on the  property. Let's talk about the seven ways that you  

as the buyer can get your earnest money back if  you decide not to buy the home. The first way is  

if you terminate the contract during your option  period or also known as your due diligence period.  

That first few days of the contract is anywhere  from three to ten days that option period can last  

which is all negotiable. During that time you as  the buyer are gonna do your due diligence on the  

property. You're going to have your inspectors  come in you're going to have the roofer come in  

electrical come in whoever you need to come  into the house to make sure that your investment  

is going to be a solid and safe and secure  investment. If during this time you decide  

this isn't the house for you for whatever reason  you as the buyer can terminate the contract.  

If you do then your earnest money is refunded back  to you. The second way that you can also get your  

earnest money back if you don't buy the house is  if you can't get your loan approved by the bank.  

Here in Texas we have an addendum to the contract  which is our third party financing addendum.  

In there you state how many days it is going  to take your lender to give you final official  

approval to buy the home. I've seen that be  anywhere from 10 days up to 25 days. Again  

it just depends on your lender. If for some reason  something has happened and you are not able to get  

final approval for your loan, then you do have  that out out of the contract and you would get  

your earnest money back. On the flip side, if you  can't get that loan approval and you are outside  

of that x number of approval days, then the seller  might be entitled to keep your earnest money  

if you don't exit the contract for any other  reasons. The third way to get your earnest money  

back is if the appraisal comes in lower than what  the contract has been agreed upon. It's always  

so terrible when this happens well let's say that  you are under contracted by the home for $400,000  

but the appraiser says that the home is only  worth $390,000 and they have to justify that  

with other comparables in the area. Well the bank  is only going to give you money for $390,000.  

They're not going to give it to you for four  hundred because the bank is saying it's not worth  

four hundred. What happens with that $10,000? A  couple things can happen. The sellers can agree to  

reduce the price of the home to $390,000 or you as  the buyer if you happen to have an extra $10,000  

and want to pay more than the appraised value  of the home, then you can pay that additional  

$10,000 to make up that difference. Well let's  say the seller is not going to reduce that price  

down to $390,000, they're going to put their  house back on the market and hope that another  

appraiser says something else and let's say you  don't have that additional $10,000, well then the  

contract will need to be terminated and if so you  as the buyer would get your earnest money back.  

The fourth reason you might get your earnest  money back is if you are under contract to  

purchase this home contingent that you sell  your current home and that home doesn't sell,  

then you would get your earnest money back,  because you are submitting an offer contingent  

that this home sells. And if it doesn't,  well then unfortunately you're gonna have  

to terminate the contract on the house that you're  buying. But you would get your earnest money back.  

The fifth way that a buyer can retain their  earnest money is, if something crazy shows up on  

the title commitment. You have a couple of days to  object to anything on that title commitment, and  

that couple of days is all negotiable and should  be agreed upon upfront before the title commitment  

has been delivered. Now when I say crazy I mean  that there may be a lien on the property that  

the seller may not know about and maybe doesn't  plan to take care of when they sell the house.  

That's not ever good. Or maybe the sellers  don't have a right to sell that property  

maybe it's a family member's home that they're  planning to sell. Well they can't sell it if  

they're not on that title. So again when I say  crazy you kind of just never know each house is  

very different but if there is something on  that commitment that you object to then you  

can terminate the contract within those x number  of days and your earnest money would be refunded  

to you. We are getting to the end of our list. The  sixth way that a buyer can retain their earnest  

money is if during the final walk through you go  through the home with your agent and some of the  

repairs that you had agreed upon that the seller  would fix weren't actually fixed. You can then  

terminate the contract and get your earnest money  back. Now I don't say let's jump to termination.  

Go back to the sellers and say 'hey this wasn't  done correctly and it was on our repair amendment  

to fix' It could have been a mistake it could  have been a slight oversight. I mean who knows,  

but if for some reason that seller says well  I'm just, you know, too bad I'm not gonna sell.  

I hope that doesn't happen. Well then you can  terminate because those repairs were not done  

per a previous agreement. And if that happens,  then you would get your earnest money back.  

The seventh way that a buyer can retain  their earnest money and I hope that this one  

never happens, is if the sellers wake up one day  and then they just decide not to sell the house  

and they don't show up to the closing  table and they don't sign those documents.  

Then you would definitely get your earnest  money back because that should not happen  

they should not do that. They are in a  legally binding contract to sell the property  

but if they decide not to for whatever  reason you are entitled to that money.  

There are other ways that you can terminate  the contract and get your earnest money,  

but these are the top seven. If you've got  any questions ask your real estate agent  

that you're working with so that you know  how protected that money is. If you have any  

more questions about the home buying process  and all that it entails check out this video  

here. Thanks so much for tuning in guys and  we'll see you next Wednesday. Have a good one!