Where Does My Earnest Money Go?

Many homeowners who want to buy property offer a certain amount of earnest money or hand money to the property sellers. Typically, earnest money is the deposit that a buyer pays to the seller so that the latter will hold the property he/she intends to buy. Depending on which state the deal is taking place in, the earnest money deposit check might be kept in escrow accounts that are non-interest-bearing. They will be held here till the related deals reach closure.

Generally, the earnest money check is applied to down payments for the property sale & closing costs requirements. A real estate earnest money deposit check & the manner in which it is applied is based on the purchase agreements that the deposit supports. Generally, real-estate purchase agreements have all the details noting what will happen to the earnest money deposit that the buyer has made, under different scenarios.

Earnest Money Amounts

In very hot markets, most real estate agents recommend that the earnest money deposits should be for 2-3% of the actual offer that is being made. In slower markets, the earnest money deposits that sellers ask can be significantly lower. Deposits of $10,000 and above come with bank & lender reporting requirements & are not really advisable. It must be understood that when you tie up a large amount of money in this manner, you will not be earning any interest on it.

Earnest Money Refunds

At times, property sellers & buyers make incorrect assumptions about these deposits. Some property sellers also mistakenly believe that if a sale fails, it automatically gives them a right to the earnest money check. Similarly, some buyers presume that even if the deal fails, they will get back all their earnest money. The fact is that in most real estate deals that fail, earnest money deposits that the buyers have made; end up with them, but the cancellation fees get deducted from the amount. Most property purchase agreements make note of when this money is refunded & to whom.

The Considerations

It goes without saying that when a real estate transaction fails, both the buyer and seller end up hotly disputing the earnest money deposits. Real estate experts always recommend that a property seller should not be permitted to hold the buyers’ earnest money deposit. The title company, real estate broker or settlement/escrow agent involved in the property sale holds these earnest money deposits. For more details about earnest money and mortgages, contact ResMac Home Loans.

 

What Does Title Insurance Protect Me From?

Whenever you buy a home/property, you expect to also enjoy some benefits from that ownership. For instance, you expect to be able to actually occupy & use the property as you like, and to be free from debts/obligations that are not created/agreed to by you. You also want to be able to pledge or freely sell your property as a security for any loan, if required. A title insurance is specifically-designed to cover all these rights that you bargain for.

How it Works

When title insurance is included in the purchase of a property, your title insurer becomes accountable for all the legal expenses incurred to defend the property title, in the event that someone challenges it. There are a number of situations in which you might require title insurance and the company that is responsible for it then takes on all the legal expenses to effectively defend that property. The condition being that you must own an interest in that property. In the event that the defense is unsuccessful, you are reimbursed for any value-loss of that property.

What is Covered?

Title insurance is also referred to as an Owner’s Policy. Generally, it is issued in the actual amount of the real-estate purchase. You pay a one-time fee at the time of closing & it is valid for the entire time that you/your heirs have an interest in that property. Only this kind of an owner’s policy provides full protection to the buyer in case any problem arises in the title. Title Insurance generally covers:

  • Forged deeds, undisclosed heirs, wills, mortgages, releases & other documents

  • Deeds by minors

  • False imprisonment of that land owner

  • Documents that are executed by any revokes/expired power of attorney

  • Fraud

  • Probate matters

  • Deeds & wills by a person who is of unsound mind

  • Rights of any divorced parties

  • Conveyances by any undisclosed divorced spouses

  • Adverse possession

  • Forfeitures of the property on account of criminal acts

  • Defective acknowledgments because of improper/expired notarization

  • Tax record errors

  • Mistakes & omissions that result in improper abstracting

Though these are the general things that are covered, certain coverage might not be available in a specific area/transaction on account of regulatory/legal/underwriting considerations. For more information about title insurance and how it works, speak with experts at ResMac Home Loans.