When you purchase a home in Maryland, earnest money signifies your commitment to the seller. It functions as a financial assurance, demonstrating your intent to finalize the transaction. Understanding its role allows you to protect your investment and avoid potential complications.
What is earnest money?
You provide earnest money after signing a real estate contract, typically amounting to one to three percent of the purchase price. A neutral third party deposits these funds into an escrow account. Upon closing the sale, the earnest money reduces your down payment or offsets part of your closing costs.
When is earnest money refundable?
You may recover your earnest money if the sale collapses due to reasons outlined in the contract. Common justifications include a failed home inspection or an inability to secure financing. If you terminate the agreement for reasons not specified, you risk forfeiting the deposit. Thoroughly examining the contract ensures you understand when you may retain your earnest money.
What happens if the deal closes?
When the transaction concludes successfully, the earnest money decreases the amount you owe at settlement. Carefully reviewing the closing documents guarantees the proper application of the deposit. Verifying these details ensures you receive full credit for your payment.
Protect your earnest money by ensuring the real estate contract explicitly details the management of the deposit. Employ a reputable escrow company or licensed real estate brokerage to safeguard the funds. Avoid delivering earnest money directly to the seller. Adhering to these practices helps prevent financial loss if unforeseen issues emerge.