Top 3 Ways To Lose Your Earnest Money Deposit
An Earnest Money Deposit, or EMD, is a buyer’s deposit made to the seller to show good faith in the transaction. It is usually held in a designated escrow account until closing. Now in most transactions your EMD will be credited to you at closing. However, there are times when a transaction is either terminated or delayed; those are the times that your EMD is at risk. Here are the top three ways you could lose your EMD.
You decide to waive all your contingencies
Now as a buyer you are protected by multiple contingencies in a contract, such as home inspection contingency or a financing contingency. However, there are times when a buyer finds themselves in a competitive situation and may choose to waive all those contingencies to make their offer more attractive. While those offers will be highly desirable to a seller, a buyer needs to realize that if for any reason they decide to void the contract their EMD is not protected and may be forfeited to the seller.
You may inadvertently cause a delay.
There are many steps that lead to a smooth closing, and there are many factors that can cause a delay. It is important that you and your Realtor ensure that everything is done in a timely manner. For example if your lender requests additional documents for your loan, it is always imperative to get things to them in a timely manner as you do not want to cause a delay in your closing date. Another example is making sure your home inspection occurs in the allowed time, if you miss a contingency date your EMD could be at risk if you need to void the contract.
You Change Your Mind
As a buyer you are protected by the various contingencies to void the contract. However, if you wait until the end and change your mind after all the contingencies have passed, your EMD will be at risk and could be forfeited if you choose not to go to closing.
Once you are under contract make sure you work closely with your Realtor to ensure that your EMD is protected. Questions? Concerns? Contact us! And remember, with us, advice is always free. Reach us at [email protected]