What happens to the earnest money?

I like to explain to people that earnest is an old fashioned word, unfortunately not commonly used today, which means sincere.  Inclusion of earnest money with an offer on the part of a buyer is an indication that they are sincere in making that offer. The amount of the earnest money deposit (EMD) is negotiable between the buyer and seller and can in fact be zero if so agreed.  In submitting a check for an EMD the buyer needs to understand that once an agreement is finalized that check, most often made payable to the broker representing the buyer, will be cashed with the  funds being transferred first to the listing broker and then to the title agent, if applicable, who deposits it in a trust account regulated, in our case, by the State of Nebraska.    The EMD funds are held until closing at which point they are applied against the buyer’s expenses reducing the amount of cash required to close.  If no agreement is reached the check is either returned to the buyer or destroyed based on the buyer’s instructions.  Typically the purchase agreement specifies that the EMD funds be returned to the buyer in the event that the parties fail to reach an agreement on the resolution of  inspection repair issues, should the buyer be unable to obtain financing or, in the case of FHA financing, if the property does not appraise for at least the purchase price.  In the event that one party otherwise fails to perform according to the terms of the purchase agreement the disbursement of the funds is based on an agreement between the parties reflected in what is called a mutual release addendum which, as the name implies, releases both parties from the original agreement  thus freeing the seller to sell the property to another buyer and the buyer to purchase another property.  Remember whether buying or selling, moving up or downsizing, Lincoln or Omaha, the Vaccaros; Paul & Susan, stand ready to assist you, your family, friends and co-workers. Call or email us today! Lincoln (402)817-0355 , Omaha (402)577-0820, info@WeSellNebraska.com (Paul & Susan Vaccaro – CBSHome Real Estate 15950 W Dodge Road, Suite 200, Omaha, NE 68118 – Woods Bros Realty 3737 S 27th Street, Lincoln, NE 68502.

Leave a comment