July 2017 Newsletter
Updated: Aug 25, 2020
OW CAN I PROTECT MY ESCROW DEPOSIT?
You have just put a real property under a purchase contract, and are ready to put down your Earnest Money Deposit, usually 3% of the purchase price. Your deposit is a substantial amount of money that you don't want to lose. If all goes well, the deposit will be applied to your down payment. But, proceed with caution because under certain circumstances your deposit could be at risk and you could lose it all. Here are several suggestions for protecting your earnest money deposit.
Give Yourself Time
Every Purchase Contract has a timeline. While many sellers are willing to give buyers extensions in extenuating circumstances, beware of "time is of the essence" sellers. If a term like this is in your contract, that generally means deadlines specified in the Contract are binding, and there is no obligation on the part of the seller to grant the buyer any sort of extension. The seller could require you to forfeit your deposit and cancel the Contract if you fail to meet these deadlines. If you are in a "time is of the essence" contract, make sure you are adequately prepared and organized to meet the proposed timeline.
Be an Expert on Your Property
As a buyer, your job is to eliminate any surprises when it comes to your new property. Sellers are required by law to disclose any and all information that could possibly have a negative impact on the property. You, as the buyer, are generally required to approve or disapprove these disclosures. Make sure you read them very carefully. You should understand each and every detail, and ask for clarification if you don't. The moment you approve these disclosures and their supporting documents, you are waiving your right to back out of the deal (and keep your deposit) for any of the facts listed in the disclosures. Make sure you truly know what you're getting into, otherwise your deposit, and your purchase, could be at risk.
In addition to the disclosures, some sellers will conduct a variety of inspections on their property to prove it is of sellable quality. Whether they do or not, make sure to conduct your own inspections with reputable providers, including any specialized inspections you deem necessary. Even if the seller provides you with reports he has commissioned, you should be relying on your own independent due diligence. Protect yourself with the appropriate contingencies in your contract. By creating inspection contingencies, you are giving yourself the right and option to opt out or renegotiate should something not go as planned.
If you have any questions about protecting your Earnest Money Deposit, please contact the Law Offices of Joseph Miskabi, APC.